Stock in Lionsgate shot up 25 percent on Friday after the Hollywood media giant posted a third-quarter earnings beat and strong content licensing by its studio ahead of a planned separation from Starz.Shares in the major studio jumped $2.09 to $10.34 at the close of financial markets as Wall Street analysts look beyond current industry headwinds to Lionsgate splitting its the pay TV and streaming business from its studio operations to make both more attractive as takeover targets.“We see these steps making it easier for the separated Starz and studio businesses to be acquired, and see the potential for the studio business alone to be valued meaningfully north of where Lionsgate’s equity currently trades,” Rosenblatt Securities analyst Barton Crockett said in a Feb. 10 investors note.On Thursday, Lionsgate said it remains “on track” to complete the separation of its studio and streaming businesses by Sept. 2023 so each can be valued higher by investors as pure play entities.Wall Street is betting the studio business and its programming library will prove attractive as a possible indie studio acquisition after the planned separation as digital titans like Apple and Amazon muscle into Hollywood.“We see the spin horizon in a few more months acting as the upside catalyst. We see studios as a potential takeout candidate post-separation,” Steven Cahall, an analyst at Wells Fargo, said in his own investors note issued on Feb. 9.Other finance experts expressed a wait-and-see stance on Lionsgate’s planned studio and Starz split, on which top studio execs were short on details during the third quarter earnings call.“This was a better quality report from Lionsgate with a more realistically positive outlook heading into its separation. Value likely won’t be unlocked however without concrete news on the split. Risks to downside include longer time to spin off motion picture segment,” Macquarie Research analyst Tim Nollen wrote in a Feb. 10 note.Ahead of the planned separation, analysts applauded strong film and TV content licensing at the studio and cost cutting as helping explain a welcome earnings beat for the third quarter results. Benchmark analyst Matthew Harrigan reiterated his buy rating and a $15 price target for Lionsgate’s stock as the studio looks to profit from its franchise movies across all platforms and ancillary streams.esses by Sept. 2023 so each can be valued higher by investors as pure play entities.“Lionsgate will make a high-profile box office return with John Wick: Chapter 4 on March 24th and Hunger Games prequel The Ballad of Songbirds and Snakes in November. Both these releases are surveyed as among the top ten major studio box office releases for this calendar year,” Harrigan wrote in his Feb. 10 note.Goldman Sachs analyst Brett Feldman raised his 12-month stock target for Lionsgate from $8 to $9 as the strong library performance from licensing Schitt’s Creek and Shotgun Wedding was offset during the latest financial quarter by “softened domestic (Starz) subscriber growth” as the premium streaming platform focuses on profitability and cost discipline.
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