Please ensure Javascript is enabled for purposes of website accessibility

Why Lions Gate Entertainment Stock Dropped 17% in December

By John Ballard - Updated Apr 16, 2019 at 3:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The television and movie studio hasn't delivered the results investors expect, which weighed on the shares last month.

What happened

Shares of Lions Gate Entertainment (LGF-A 13.04%) (LGF-B 12.66%) declined 17.1% last month, according to data from S&P Global Market Intelligence.

Check out the latest Lions Gate Entertainment earnings call transcript.

SPY Chart

SPY data by YCharts.

It was a tough year for the entertainment studio, with the shares down 52.4% in 2018. The stock underperformed the S&P 500 index, which lost 6.35% in value last year. 

So what

To be clear, there wasn't any specific news out of the company last month to explain the decline in the shares. Instead, investors seemed to be processing the company's previous quarter's results that left much to be desired on the bottom line.

A man and woman sitting on the ground in the desert facing each other.

A scene from Outlander TV series. IMAGE SOURCE: STARZ. 

In the fiscal second quarter, Lions Gate reported a decent quarter relative to expectations. The company faced tough year-over-year comparisons with last year's releases of The Hitman's Bodyguard and The Big Sick released in partnership with Amazon.com's studios division. Total revenue came in at $901 million, compared with $941 million in the year-ago quarter. 

The company's lackluster performance on the bottom line explains why the stock price has been trending down lately. The company reported adjusted earnings per share of $0.22 in the last quarter. For the full year, analysts expect Lions Gate to report a net loss of $0.51 per share, compared with a profit of $2.15 in 2017. 

Now what

Analysts expect Lions Gate to bounce back in 2019, with adjusted earnings expected to be $0.64 per share. The company's hit shows on Starz, including Power, Outlander, and American Gods, helped grow subscribers by 1.3 million in the fiscal second quarter, bringing the total to 25.1 million. Management has plans to release more Starz content in theaters this year. Plus, Lions Gate continues to work on international expansion through its partnership with Amazon Prime, Liberty Global's Virgin Media in the U.K., and others, which should get the company back on track.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon, Lions Gate Entertainment Class A, and Lions Gate Entertainment Class B. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
LGF-A
$10.92 (13.04%) $1.26
Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
LGF-B
$10.32 (12.66%) $1.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.