Lionsgate Entertainment’s LGF.A is benefiting from strong domestic subscriber growth and rise in streaming services revenues.
Notably, in first-quarter fiscal 2020, revenues rose 3.3% year over year to $963.6 million and beat the Zacks Consensus Estimate of $949 million. Streaming services’ revenues surged 73% year over year to $6.4 million.
Revenues were driven by robust box-office collections of John Wick: Chapter 3 – Parabellum.
Also, total domestic subscribers were 24.4 million, up 500K year over year. Starz domestic over-the-top (OTT) subscribers grew sequentially by 400k to 4.4 million in the reported quarter.
Partnerships, growing penetration of Starz in international markets, and investments in live game streaming and e-sports are major growth drivers for the company.
Strength in Partnerships
The company’s pod strategy partnership to develop high-end content for TV comes with producers such as 3 Arts Entertainment and talents, including Mary J. Blige, Courtney Kemp, Jonathan Levine, Matt Kunitz and Mona-Scott Young.
Availability of Starz on Hulu in addition to YouTube TV and Sling is a key catalyst.
Notably, AT&T T has entered a multi-year content carriage agreement with Starz to offer the full suite of STARZ and STARZ ENCORE premium linear, and HD channels, On-Demand, HD On-Demand and online services to its DIRECTV, AT&T TV and U-verse video platform customers.
Premium Programming & Expansion
Lionsgate’s premium content development with shows like Dear White People and Orange is the New Black have been hits for Netflix. The Television Production division is set to launch new series on Apple AAPL, ABC, Starz, AT&T’s upcoming HBO Max, Turner, OWN, NBC and Pop.
Additionally, the acquisition of premium scripted series included hit shows like Killing Eve on BBC America, The Act and Ramy on Hulu and the Batman prequel Pennyworth.
Moreover, STARZPLAY International’s subscriber growth is expected with expanding footprint in 26 additional countries during the reported quarter. It is now live in 45 countries.
Live Game-Streaming & E-Sports to Boost Growth
Also, investments in esports and mobile gaming are expected to diversify the company’s revenue sources in the long haul. Per Marketsandmarket report, the esports market is expected to reach $2,174.8 million by 2023, at a CAGR of 18.61% between 2018 and 2023.
Lionsgate has invested in Immortals franchise, which includes the Los Angeles Valiant of The Overwatch League. Further, the company invested in Finnish mobile game developer/publisher, Next Games and live-streaming native mobile gaming platform, Mobcrush.
Lions Gate Entertainment Corp. Price and EPS Surprise
Lions Gate Entertainment Corp. price-eps-surprise | Lions Gate Entertainment Corp. Quote
Strain in Comcast’s Relationship: A Concern
However, with increasing strain between programming services and cable distributors, Lionsgate is also expected to face the heat.
Per Information report, Comcast CMCSA, which is the largest U.S. cable service provider, plans to drop Liongate’s Starz and Encore channels from its main television line up.
The existing deal is due for renewal in four months. Starz home series Power and Outlander are popular among cable subscribers in the United States and is expected to adversely impact Comcast’s subscriber growth in the future.
Moreover, continued investment in Starz is expected to hurt the company’s profitability and keep margins under pressure in the near term.
Currently, Lionsgate has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AT&T Inc. (T) : Free Stock Analysis Report
Comcast Corporation (CMCSA) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Lions Gate Entertainment Corp. (LGF.A) : Free Stock Analysis Report
To read this article on Zacks.com click here.