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Why Lionsgate's Stock Jumped 10% Higher on Friday

By Anders Bylund – Feb 7, 2020 at 2:50PM

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The content producer scored several major box office hits in the holiday quarter, and its streaming video ambitions are gaining traction.

What happened

Lionsgate Entertainment (LGF-A 1.26%) (LGF-B 1.02%) posted strong third-quarter results on Thursday evening and the entertainment studio's stock responded with strong jumps on Friday. Class A shares rose as much as 9.9% while Class B stubs topped out at 10.5%. By 3 p.m. EST, the two stock classes had retreated to gains of 5.7% and 6.5%, respectively.

Close-up photo of a father and daughter sharing some popcorn in a packed movie theater.

Image source: Getty Images.

So what

Third-quarter revenue rose 7% year over year to $999 million. Adjusted earnings landed at $0.14 per share, down from $0.35 per share in the year-ago period. The analyst consensus pointed to a net loss near $0.13 per share on top-line sales of roughly $944 million, and Lionsgate absolutely crushed those expectations.

Now what

The company's cinematic operations profited from blockbuster box-office takes by Rian Johnson's thriller Knives Out, political drama Bombshell, and the third title in Keanu Reeves' action-packed John Wick franchise. Lionsgate also signed up 1 million new subscribers to its collection of streaming video platforms. It's no surprise to see Lionsgate's shares soaring on an analyst-stumping report like this one.

Lionsgate's two stock classes have now gained more than 20% over the last three months, but they are also trading 40% lower from a 52-week perspective. The stocks are trading at deep-discount valuation ratios normally reserved for companies on the brink of disaster, even though Lionsgate's business appears to be in good health.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Lionsgate Entertainment Class A and Lionsgate Entertainment Class B. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
$8.40 (1.26%) $0.10
Lions Gate Entertainment Corp. Stock Quote
Lions Gate Entertainment Corp.
$7.94 (1.02%) $0.08

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