KeyBanc Pulls Back On Lions Gate Amid Lower Estimates, Poor Visibility

Lions Gate Entertainment Corporation Class A Voting (NYSE: LGF.A) (NYSE: LGF.B) is failing to captivate its audience. A few weeks after suffering a Morgan Stanley downgrade, the stock lost another fan.

The Rating

KeyBanc Capital Markets analyst Evan Wingren downgraded Lions Gate from Overweight to Sector Weight and did not issue a price target.

The Thesis

Wingren sees upside in Lionsgate’s buyout potential and international opportunities, but that’s about it.

“Although we think Lionsgate should continue to trade at a premium to ad-supported cable network peers, even accounting for this on lower estimates, we struggle to justify upside for a more positive view,” the analyst said in a Friday note.

Lionsgate's reduced guidance for 2018 and 2019 operating income before depreciation and amortization did little to convince him otherwise.

At the same time, the market has limited visibility on the firm’s shrinking and higher-cost film slate, and TV production is slowing.

Lionsgate is seen to suffer challenges in its Starz segment, which posts declining subscriptions and renewals despite being “better-positioned than ad-supported peers,” and investments in original content promise uncertain payoff as programming competition increases, Wingren said. 

Price Action

At the time of publication, Class A and B shares were trading down about 13 percent.

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