3 Stocks to Watch at the San Diego Comic Con
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The middle of July brings excitement to comic book fans, television watchers, and movie viewers through the San Diego Comic Con. The annual event, held from July 18 through July 21, also offers investors opportunities to profit from excitement over new releases and future earnings. Here is a look at three potential winners from the event.
Lions Gate goes big
Perhaps no other company will be as closely followed as Lions Gate Entertainment (NYSE: LGF). At the 2013 Comic Con, Lions Gate will show off footage from four upcoming movies. Among the highlights will be footage from “The Hunger Games: Catching Fire.” The follow-up to the highly successful “The Hunger Games” movie released in March of 2012 could further propel the stock.
“The Hunger Games” made $408 million in North America and $691 million in total box office revenue. Since the release of the movie, Lions Gate shares have increased 108%. Recently, “Catching Fire” was named the most anticipated movie of 2013 and should easily top the box office results of “The Hunger Games.” In fact, with improving international revenue, some experts are forecasting the sequel to top the $1 billion mark in 2013.
As if “Catching Fire” wasn’t enough for Lions Gate shareholders and fans to get excited about at Comic Con, Lions Gate has other exclusives coming. The company will premiere footage from upcoming March 2014 release “Divergent.” Also based on a popular young adult book series, “Divergent” will be able to most likely bring a huge box office total for Lions Gate. “Ender’s Game” and “I, Frankenstein” will also be showcased at the convention. With “Divergent” and “Ender’s Game,” Lions Gate has successful book franchises that can take the company to new heights.
With all the hype surrounding the upcoming releases along with potential buzz from Comic Con, I have to question analysts’ expectations. For fiscal 2014, revenue is expected to rise only 0.7%. Fiscal 2015 revenue is projected to rise 5.7%. I think both of these numbers are conservative and investors should buy in before they kick themselves. In its fourth quarter earnings report, Lions Gate said they are “creating new franchises as we continue to leverage and exploit our existing brands.” At Comic Con, they are doing just that.
Since being spun-off from Liberty, shares of premium television channel Starz (NASDAQ: STRZA) are up an impressive 37%. With analysts and investors sniffing around for acquisition targets in the original content space, Starz shares continue to climb. However, a successful Comic Con could make that buyout cost even higher or supplant Starz as a worthy investment on its own.
At Comic Con, Starz will debut the pilot episode for its upcoming original television show “Black Sails.” The show about pirates is being produced by Michael Bay, popular director of the “Transformers” movies. Beginning in January of 2014, viewers can tune in to the show that centers around Captain Flint and new crew member John Silver. Reception from the show’s pilot at Comic Con could really give investors and analysts an idea of the potential of the show.
Starz needs a new hit for its original scripted segment. The channel has had several strong shows, including the recently ended “Spartacus.” New show “Da Vinci’s Demons” has been well received and renewed for a second season. However, with a bigger spotlight as a public independent company, Starz needs a big boost from “Black Sails.” “The White Queen,” which premieres in August, will also see prominent discussion at Comic Con.
With a small market capitalization of $2.6 billion, Starz has a bigger chance to see a large impact from Comic Con. Starz generates the majority of its revenue from subscription fees generated from cable networks. Starz airs many first run movies on cable and is able to generate strong subscription numbers. The company recently signed a deal with Sony to air first run movies through 2021, which will hopefully offset the loss of Disney movies to Netflix.
Despite its run-up, shares of Starz are still trading at low valuations of around twelve times expected earnings per share. Analysts are also counting on flat revenue growth over the next two years. With a few successful scripted shows, revenue may see strong increases and shares could really take off, if the company isn’t bought out first.
AMC has the biggest show
One of the most anticipated participants at the San Diego Comic Con is “The Walking Dead.” The show recently made history as the first cable original series to end as the top ratings getter for a whole season. The show, which airs on AMC Networks (NASDAQ: AMCX), continues to boost the stock.
“The Walking Dead” has turned into a cultural phenomenon. The show continues to be the most watched on television and sees strong ratings in all key advertisement demographics. This bodes well for AMC as it is able to push for higher subscriber fees as renewals come up. This also allows AMC Networks to bundle smaller channels like IFC and Sundance to maximize subscription revenue thanks to demand for the show.
Comic Con will be important for AMC this year. “The Walking Dead” will be a huge draw for fans and will also allow AMC a chance to show off new showrunner Scott Gimple. Gimple has been a writer since the show began in 2011 and now takes over the storyline. For the second year, AMC will also help transform the nearby Petco Park into a live obstacle course centered around zombies and scenes from the television show. This will also be the last Comic Con to feature a “Breaking Bad” panel as the show comes to an end this summer.
I have been a Lions Gate shareholder even before “The Hunger Games” hit theaters. I continue to recommend buying shares based on the strength of the franchise and other potential blockbuster series. Comic Con will show just how strong “Ender’s Game” and “Divergent” can be. Shares have had a nice run, but continue to be undervalued based on blockbuster box office revenue coming from three of the biggest young adult franchises.
Shares of Starz represent a nice buying opportunity for investors who believe “The White Queen” or “Black Sails” could be a hit. Investors are essentially buying the movie airing networks and subscription fees with none of the original scripted shows priced in. “The Walking Dead” continues to pull bigger numbers each season. This fact, along with the strength of other shows on the network, should take shares higher by the end of 2013.
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Chris Katje owns shares of Lions Gate Entertainment. The Motley Fool recommends AMC Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!