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Lions Gate Entertainment: 'Divergent' Beats Lowered Expectations
There are still questions surrounding the global entertrainment company's future.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The box office numbers are in, and Lions Gate's (NYSE:LGF) Divergent turned out to be... a question mark.

Divergent hit $56 million for its opening weekend, which is basically in line with recently lowered expectations, and most importantly, it was not a bomb. That means perhaps a bit more investor confidence in the already approved sequel, and we're seeing a relief rally in early trading following Friday's 8% drop.

A few weeks ago, there was talk of an opening in the $70 million range.

On Thursday (March 20), I noted expectations for a $50 million opening, but I should have been clearer; $50 million was more the bottom end of expectations.

However, I don't think this story is over yet because the opening weekend was relatively easy. There were a lot of Divergent fans who would have seen the movie even if it had 100% negative reviews. The next step is to monitor how box office returns fall off.

Here's a sampling of second weekend box-office returns for comparable films from BoxOfficeMojo.com:

The Hunger Games: -61.6%
The Hunger Games: Catching Fire: -53.1%
Twilight: -62.2%
Harry Potter and the Sorcerer's Stone: -36.3%
Ender's Game: -62.0%

I'd say somewhere around -60% is what investors would like to see. (Harry Potter was an outlier.)

On Friday, I backed off shorting Lions Gate (subscription required) because I felt emotion entered the equation. I wanted to be the smart guy that went four for four on Lions Gate trades, and shooting for that type of ego fulfillment seemed unhealthy.

But my brain's been reset a little bit, and here's what I'm thinking:

I still have doubts about the sustainability about the dystopian teen sci-fi genre, and since what moves Lions Gate is expectations for blockbuster films, it's a little hard to get behind the stock. We're a long way from 2011 when 99% of investors hadn't heard of The Hunger Games.

You can't compare Lions Gate to diversified media companies like Disney (NYSE:DIS) -- it's more like Take-Two Interactive (NASDAQ:TTWO). Ideally, you want to anticipate the masses' anticipation of big releases and ride the subsequent wave of momentum buying.

Divergent didn't bomb, but it only hopped over lowered expectations. I don't think that's going to be a sustainable source of excitement, and so I'll remain on the sidelines.

However, there will likely be trading opportunities on both the long and short sides as we approach the November 21 release date of The Hunger Games: Mockingjay, Part 1.

Stay tuned!

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Lions Gate Entertainment: 'Divergent' Beats Lowered Expectations
There are still questions surrounding the global entertrainment company's future.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The box office numbers are in, and Lions Gate's (NYSE:LGF) Divergent turned out to be... a question mark.

Divergent hit $56 million for its opening weekend, which is basically in line with recently lowered expectations, and most importantly, it was not a bomb. That means perhaps a bit more investor confidence in the already approved sequel, and we're seeing a relief rally in early trading following Friday's 8% drop.

A few weeks ago, there was talk of an opening in the $70 million range.

On Thursday (March 20), I noted expectations for a $50 million opening, but I should have been clearer; $50 million was more the bottom end of expectations.

However, I don't think this story is over yet because the opening weekend was relatively easy. There were a lot of Divergent fans who would have seen the movie even if it had 100% negative reviews. The next step is to monitor how box office returns fall off.

Here's a sampling of second weekend box-office returns for comparable films from BoxOfficeMojo.com:

The Hunger Games: -61.6%
The Hunger Games: Catching Fire: -53.1%
Twilight: -62.2%
Harry Potter and the Sorcerer's Stone: -36.3%
Ender's Game: -62.0%

I'd say somewhere around -60% is what investors would like to see. (Harry Potter was an outlier.)

On Friday, I backed off shorting Lions Gate (subscription required) because I felt emotion entered the equation. I wanted to be the smart guy that went four for four on Lions Gate trades, and shooting for that type of ego fulfillment seemed unhealthy.

But my brain's been reset a little bit, and here's what I'm thinking:

I still have doubts about the sustainability about the dystopian teen sci-fi genre, and since what moves Lions Gate is expectations for blockbuster films, it's a little hard to get behind the stock. We're a long way from 2011 when 99% of investors hadn't heard of The Hunger Games.

You can't compare Lions Gate to diversified media companies like Disney (NYSE:DIS) -- it's more like Take-Two Interactive (NASDAQ:TTWO). Ideally, you want to anticipate the masses' anticipation of big releases and ride the subsequent wave of momentum buying.

Divergent didn't bomb, but it only hopped over lowered expectations. I don't think that's going to be a sustainable source of excitement, and so I'll remain on the sidelines.

However, there will likely be trading opportunities on both the long and short sides as we approach the November 21 release date of The Hunger Games: Mockingjay, Part 1.

Stay tuned!

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
More From Michael Comeau
Daily Recap
Lions Gate Entertainment: 'Divergent' Beats Lowered Expectations
There are still questions surrounding the global entertrainment company's future.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The box office numbers are in, and Lions Gate's (NYSE:LGF) Divergent turned out to be... a question mark.

Divergent hit $56 million for its opening weekend, which is basically in line with recently lowered expectations, and most importantly, it was not a bomb. That means perhaps a bit more investor confidence in the already approved sequel, and we're seeing a relief rally in early trading following Friday's 8% drop.

A few weeks ago, there was talk of an opening in the $70 million range.

On Thursday (March 20), I noted expectations for a $50 million opening, but I should have been clearer; $50 million was more the bottom end of expectations.

However, I don't think this story is over yet because the opening weekend was relatively easy. There were a lot of Divergent fans who would have seen the movie even if it had 100% negative reviews. The next step is to monitor how box office returns fall off.

Here's a sampling of second weekend box-office returns for comparable films from BoxOfficeMojo.com:

The Hunger Games: -61.6%
The Hunger Games: Catching Fire: -53.1%
Twilight: -62.2%
Harry Potter and the Sorcerer's Stone: -36.3%
Ender's Game: -62.0%

I'd say somewhere around -60% is what investors would like to see. (Harry Potter was an outlier.)

On Friday, I backed off shorting Lions Gate (subscription required) because I felt emotion entered the equation. I wanted to be the smart guy that went four for four on Lions Gate trades, and shooting for that type of ego fulfillment seemed unhealthy.

But my brain's been reset a little bit, and here's what I'm thinking:

I still have doubts about the sustainability about the dystopian teen sci-fi genre, and since what moves Lions Gate is expectations for blockbuster films, it's a little hard to get behind the stock. We're a long way from 2011 when 99% of investors hadn't heard of The Hunger Games.

You can't compare Lions Gate to diversified media companies like Disney (NYSE:DIS) -- it's more like Take-Two Interactive (NASDAQ:TTWO). Ideally, you want to anticipate the masses' anticipation of big releases and ride the subsequent wave of momentum buying.

Divergent didn't bomb, but it only hopped over lowered expectations. I don't think that's going to be a sustainable source of excitement, and so I'll remain on the sidelines.

However, there will likely be trading opportunities on both the long and short sides as we approach the November 21 release date of The Hunger Games: Mockingjay, Part 1.

Stay tuned!

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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