Lions Gate Gets Boost from JPMorgan Ahead of Split

Lions Gate Entertainment ( NYSE: LGF.A ) ( NYSE: LGF.B ) was in focus on Monday as J.P. Morgan upgraded the entertainment company, ahead of the upcoming separation of its Starz and Lionsgate Studio businesses into two separate public companies.

Shares rose 2% in premarket trading.

David Karnovsky noted in his client memo: "The division creates opportunities for generating greater value and, at minimum, removes a disadvantageous framework for investors that contributed to some of our previous pessimistic stance. Additionally, Lionsgate’s Movie Division has recovered from a challenging phase, making us more hopeful about their future projects expected to enhance box office success in fiscal year 2026 along with subsequent distribution channels, bolstered further by a fresh partnership with Amazon. As for Starz, although we remain cautiously upbeat following extensive discussions with executives outlining short-to-medium term prospects, enduring worries persist due to fierce competition within the streaming sector."

Karnovsky upgraded Lions Gate's rating to Neutral from Underweight and increased his price target for the merged entity to $9 from $8.

Currently, Lionsgate Studios is trading at just under 11 times the estimated EBITDA for fiscal year 2026. This suggests that Starz might be valued at approximately three times its EBITDA, placing it below industry peers like AMC Networks. AMCX ).

In regard to fiscal year 2026, he anticipates that the Studio EBITDA will reach $361 million. This projection partly reflects an improved lineup of film releases, which includes titles like Now You See Me 3 , Ballerina and Michael , the biography film on pop icon Michael Jackson. Aiming towards the fiscal year 2027, a new Hunger Games The movie ought to assist, along with any tweaking needed for the Windows payment.

For Starz, revenues are expected to increase within the range of 1% to 3% through fiscal year 2028, as stated in management discussions, driven by growth in digital subscribers, price hikes, bundled packages, and a fresh agreement with Amazon. AMZN Margins might increase to approximately 20%, along with Starz asserting greater control over its own productions, relative to their current position.

Overall, although we welcome the much-anticipated division and Starz’s strategies, we remain unconvinced about significant potential gains from either segment. We also perceive general risks regarding their implementation across various sectors," Karnovsky noted further. "Considering our perspective, we prefer to stay neutral until after the corporate separation.

Shareholders of Lions Gate are set to vote on the separation on April 23rd.