Shares of Lions Gate EntertainmentLGF.A have declined 32% on a year-to-date basis primarily due to lower profitability as result of increasing spending. Moreover, the ongoing restructuring initiative is expected to keep margins under pressure.
However, we expect the stock to rebound in the rest of 2018 driven by its focus on profitable areas and strategic buyouts like that of Starz. Moreover, partnership with the likes of UMG is anticipated to provide significant boost to top-line growth.
Lions Gate recently joined forces with Universal Music Group (UMG) to create music-based TV projects, drawing on UMG's popular portfolio of music, artists and labels. The multiyear deal provides the company exclusive access to UMG's ideas and concepts before making it available to other studios.
Polygram Entertainment, UMG's film and television production and development division, and Lions Gate will provide exclusive content by using the music company's popular labels. The probable picks include Interscope, Republic and Blue Note among many others.
Additionally, UMG is also responsible for providing soundtracks for the projects developed under this partnership.
This announcement follows the recent agreement between Lions Gate and Universal Music Publishing Group (UMPG), wherein the latter is responsible for the Lions Gate music publishing segment globally. Moreover, both the companies will work to deliver music content internally for Lions Gate's portfolio of television, film and digital channels.
Moreover, Lions Gate and UMG have worked on several projects, which were a huge success. The projects include popular films such as La La Land , Hunger Games and Divergent for which the companies developed scores and soundtracks.
Lions Gate Diversifying Revenue Streams
We believe Lions Gate's strategy to emerge as a major player in the TV space and enhance its competitive position through inorganic growth and alliances bode well for the company.
Lions Gate's investment in the e-sports franchise, The Immortals, is a positive. With the increasing popularity of e-sports, the market is expected to grow over $1 billion by the next year.
The franchise competes in famous online video games like League of Legends , Counterstrike GO , Overwatch and Super Smash Brothers .
Additionally, the company plans to produce original e-sports entertainment content for television as well as digital platforms. In this connection Pilgrim Media Group - in which Lions Gate has a majority stake - partnered with leading e-sports promoter, ESL in the previous year.
Furthermore, the company invested in live streaming mobile gaming platform, Mobcrush.
Lions Gate Entertainment Corp. Revenue (TTM)
Zacks Rank & Key Picks
Currently, Lions Gate carries a Zacks Rank #4 (Sell).
Weight Watchers International WTW is a better-ranked stock in the broader consumer discretionary sector with a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>