You Should Be Licking Your Chops Over This Entertainment Stock

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Shares of publishing house Scholastic (Nasdaq: SCHL  ) are soaring today, jumping as high as 24.7% on a terrific third-quarter report. Surprisingly, Lions Gate Entertainment (NYSE: LGF  ) didn't move at all on the news.

I smell an opportunity here. Look for a CAPScall by the end of this article.

Why am I shocked at Lions Gate investors' indifference to Scholastic's report? On the surface, that's like expecting thunderstorms tomorrow because the Miami Heat lost yesterday. The catalyst doesn't seem to be connected to my expected outcome.

But Scholastic's quarter really does have a bearing on Lions Gate. See, the publisher's analyst-stomping sales and rosy full-year outlook stem from high interest in the Hunger Games books by Suzanne Collins. If you've turned on a TV at any time in the past month, you know that Lions Gate raises the curtain on its first Hunger Games movie next week. Massive book sales should portend huge box office numbers.

In all fairness, Lions Gate shares have roared into 2012 on a full tank of rocket fuel while Scholastic didn't have any of that momentum. The studio's share prices have gained 62% so far this year, so it's not like investors didn't see Hunger Games coming.

Still, today's news confirms those high expectations. The movie industry looks bland these days given the spectacular box office failure of Walt Disney's (NYSE: DIS  ) John Carter and general lack of market-moving blockbusters in recent memory. But Hunger Games will change all that, and then we have Disney's The Avengers hitting theaters in early May. Oh, and Lions Gate isn't quite finished with the Twilight cash machine yet.

For a market starved of serious blockbuster hits, 2012 looks like a game-changer. We only scratched the surface of expected megahits here. We Netflix (Nasdaq: NFLX  ) shareholders look forward to Hunger Games hitting the company's streaming service next year, giving drama-hungry teenagers everywhere something to spend $8 of their monthly allowance on.

I don't think the market has given Lions Gate enough credit for the impending Hunger Games spectacle, and I'm taking advantage of that disparity by starting a bullish CAPScall on the mini-major studio. Investors win when writers and analysts moneyball the financial world.

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Walt Disney and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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10/21/2016 4:02 PM
LGF $19.71 Up +0.41 +2.12%
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