Lions Gate Keeps the Wheels Turning

It may not be the most adventurous or art-forward strategy, but Lions Gate Entertainment's (NYSE: LGF  )  laser focus on young-adult franchise films has been an absolute home run. Starting years ago with its Twilight series -- and still winning from it on home video and TV sales of the films -- Lions Gate has since followed up with two smash-hit installments of The Hunger Games and just last week debuted what will likely be another winning YA-focused franchise, Divergent. These assets, while extremely costly in the short term, bear years of fruits for the company and, ultimately, investors. Here's why Lions Gate may be the best bet in entertainment.

Rinse and repeat
Twilight's first film chapter earned $70 million in its opening weekend -- a tremendous victory for what at the time was a shaky Lions Gate (and embattled by none other than Carl Icahn). That paled in comparison to its next young-adult debut, The Hunger Games, which scored more than $150 million in its opening weekend. Both became multibillion-dollar global sensations and have been largely responsible for sending Lions Gate stock up 90% in the past two years and 350% in three.

Last weekend, the company released a third adaptation of a bestselling teen novel, Divergent. It wasn't as big a splash as the first two (it wasn't expected to be), but the film delivered box-office results ahead of estimates with $56 million, nearly guaranteeing that the studio will move forward with additional installments.

If there is one near-sure bet in today's entertainment world, it's that a film that appeals to a majority female under-18 audience will pay back in spades for its backers. Divergent brought in 59% female moviegoers and earned high marks from the often finicky demographic.

Smoothing effect
Film studios and distributors are known to have their ups and downs, with good luck quickly turning to bad given the exorbitant costs of making mainstream films, but Lions Gate has insurance. Its two bulletproof franchises will continue to delight investors all on their own. The Hunger Games has more films to break box-office records, and Twilight is earning the company's TV segment a pretty penny. These assets have a relatively long shelf life, and increasingly so. As options for viewing grow, the opportunity to license these extremely valuable films behaves accordingly.

By the early looks of it, Lions Gate has a newborn franchise in its hands, and one that can similarly deliver results for years to come.

Sure, these titles may not cement Lions Gate as the arbiter of film as art, but it should make investors very happy. The company trades at 17 times forward earnings, which certainly isn't cheap, but with the wind at its back, Lions Gate should strongly appeal to investors interested in the space.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2888238, ~/Articles/ArticleHandler.aspx, 9/1/2014 7:43:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement