When most investors are down on a stock they own, they get depressed and sell.
Not so for Carl Icahn. Since he first bought shares of Lions Gate Entertainment Corp. (NYSE: LGF) back in mid-2006, the stock has fallen from around $10 per share to the current price of just over $7. Now Icahn has doubled his stake in the film house to 9.2%. Lions Gate is best-known for hit movies including "Crash" and "Saw", along with TV shows such as "Weeds" and "Mad Men." Icahn may see tremendous value in the company's library of films.
Vice Chairman Michael Burns told (subscription required) The Wall Street Journal that "Mr. Icahn and Lions Gate seem to share a similar vision of the growing value of content as platforms increase delivery around the world."
It'll be interesting to see if Icahn gets active in this company. He has said that he views the company as underleveraged, but current market conditions may make it tough for the company to pursue some of Icahn's favorite value-creation strategies: borrowing money to buy back stock and/or pursuing a sale or merger.
Wachovia upgraded shares of The Goldman Sachs Group Inc (NYSE: GS) to Outperform from Market Perform on expectations for greater pricing power given Goldman's position as the largest remaining independent securities firm.
Keefe Bruyette upgraded Investment Technology Group Inc (NYSE: ITG) to Outperform from Market Perform as they believe the company will take market share with the reshaping of the large wire-house brokerage community. The company's target was raised to $37 from $33.
Broadpoint raised Hoku Scientific Inc (NASDAQ: HOKU) to Buy from Neutral as they believe the contract with Tianwei New Energy reduces financing risk.
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are Time Warner Inc. (NYSE: TWX), Cisco Systems Inc. (NASDAQ: CSCO), News Corp. (NYSE: NWS), and Whole Foods Market International (NASDAQ: WFMI). Let's take a look at which companies Wall Street analysts are expecting to be among the top earnings gainers and decliners this week.
Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.
Lions Gate Entertainment (NYSE: LGF), the little studio that makes big waves in Hollywood with franchise hits such as Saw and Hostel, distributed its annual earnings numbers on Friday after market close. For fiscal 2008, revenues leaped like a lion (you knew that was coming, don't kid yourself) to $1.36 billion, which represented top-line appreciation of 39%. So far, an excellent start. But, it's the bottom line where things start to get ugly. Lions Gate reported a net loss of $0.62 per diluted share; in 2007, the studio booked net income of $0.25 per share. That can't be pleasing to shareholders. According to Marketwatch, Lions Gate did not meet expectations, as some on Wall Street believed the loss would be closer to $0.50 per share (the company did beat on the top line, though). Things were rosier for the fourth quarter, as revenues jumped over 50% and net income climbed 19% to $0.22 per share. Unfortunately, expectations were again too high, as analysts were hoping for $0.37 per share.
The cash flow is a little more pleasing. Operational cash flow increased just shy of 50% to $89.2 million. And the company adjusted this stat even further to come up with a free-cash-flow figure of nearly $137 million (the company adds back the effect of borrowings for production obligations). The huge problem here is a familiar story: rising costs for marketing and distribution. This isn't unique to Lions Gate; competitors such as Disney (NYSE: DIS), Time Warner (NYSE: TWX), Viacom (NYSE: VIA), and Sony (NYSE: SNE) all face this same issue. Management reported that costs for Lions Gate in this regard rose well over 100%.
Lions Gate is a tough one for me. Here's the thing: I love the movie business, and Lions Gate is definitely a more direct play on the business than what you get through a Disney or a Time Warner due to the scales involved. Lions Gate has some great franchises under its belt, and it tends to go for niche, edgy content. Plus, the cash flow is pretty cool.
Father's Day is around the corner. Why not spend some time looking at the coming earnings and how Dad's Day may have an impact. It is funny to see how many of the companies reporting earnings this week actually have links to Father's Day.
While this column has been obviously bearish of late, there are a few potential winners that may appear, just in time for the big day. Time to stock up on gifts for dear-ole-dad, or get farther away from stocks? You tell me... (by the way, comments and ideas are always appreciated)
Monday, May 26
Markets will be flat. I am certain that stocks on the U.S. Market will close at the exact price they closed last Friday. But what do I know!
While the earnings season is beginning to wind down for the current quarter, there are still plenty of results to come. Here's a peek at what analysts surveyed by Thomson Financial are expecting from companies scheduled to report results in the final week of May 2008.
These companies are expected to post earnings growth, compared to the same period in the previous year:
Dell Inc. (NASDAQ: DELL) down 2.9% to 33 cents per share, on $15.66 billion in revenue
TiVo Inc. (NASDAQ: TIVO) is expected to swing to a loss of a penny per share, compared to a penny profit a year ago, and report $55.62 million in revenue. And analysts expect Borders Group Inc. (NYSE: BGP) to narrow its loss 7.8% to 47 cents per share, on $801.11 million in revenue.
MOST NOTEWORTHY: Time Warner Telecom, Verigy and Brinker were today's noteworthy initiations:
Friedman Billings expects Time Warner Telecom (NASDAQ: TWTC) to post free cash flow growth above consensus expectations and believes carrier spending-concerns are overdone. The firm initiated shares with an Outperform rating and $20 target.
Oppenheimer initiated Verigy (NASDAQ: VRGY) with a Perform rating and $23 target, pointing to the company's tough year over year comps as PC unit growth slows in 2008 as well as its exposure to flash memory chips.
Brinker (NYSE: EAT) was assumed with a Neutral rating at Suntrust, as they expect Chili's to continue to be impacted by weak consumer spending.
OTHER INITIATIONS:
Baird assumed Ulta Salon (NASDAQ: ULTA) with an Outperform rating and $18 target.
Lions Gate (NYSE: LGF) was initiated at Jefferies with a Hold rating and $10-$11 target.
Landstar System (NASDAQ: LSTR) was initiated with a Market Perform rating at Morgan Keegan.
Lions Gate (NYSE: LGF), the feisty little studio that is responsible for torture-porn franchises Saw and Hostel, has hooked up with Apple (NASDAQ: AAPL) to see if consumers care about owning digital copies of the movies they buy on DVD and Blu-ray format.
According to the following press release, Lionsgate will include an iTunes digital version of select projects on certain home-video releases. The digital copy will allow users to transfer a movie to an iTunes account, so it could then be viewable on multiple devices like PCs or Macs, iPods, Apple TV and iPhones. First up for the iTunes digital treatment will be Sylvester Stallone's Rambo -- yes, the old soldier is still around -- to be released to home video in May.
As the studio makes clear in its press release, this is all about experimentation with the promotion of new distribution models. Lionsgate wants to efficiently, and effectively, create new opportunities for its library. It's not alone -- Disney (NYSE: DIS), Viacom (NYSE: VIA), Time Warner (NYSE: TWX), Sony (NYSE: SNE) and General Electric's (NYSE: GE) NBC Universal asset are all on a never-ending study of how best to leverage the digital era to make money from content portfolios. Lionsgate wants DVD buyers to realize that they can use iTunes to buy movies from its catalog. It's a bit weird to me, though, since one would figure that a person who buys a DVD will probably just access that particular content from the DVD itself. I understand the value of transferability, of course, but if Lionsgate -- or any content provider, for that matter -- simply ensures that each digital product sold online contains unique, compelling extras that cannot be found in any other format, then a digital library will be that much easier to monetize.
At any rate, it will be interesting to see how Apple and Lionsgate do with this scheme. Apple and its iTunes brand are certainly powerful drivers of digital distribution, so maybe users will perceive a value from the digital copies.
Disclosure: Steven Mallas owns shares of Disney and General Electric; positions can change at any time.
American Electric Power (NYSE: AEP) has agreed to pay penalties totaling $15M to end a Clean Air Act lawsuit brought by the Justice Department for the EPA, reported the Wall Street Journal (subscription required).
In 1992 Ecuador left OPEC, but this month is expected to rejoin the organization, according to the Wall Street Journal.
The UK is going to purchase 140 armored vehicles from Force Protection (NASDAQ: FRPT) for use in Iraq and Afghanistan, according to the Associated Press.
India's Reliance Retail has won the exclusive marketing and distribution rights for Apple (NASDAQ: AAPL) stores in India. The first Apple-owned store in India is scheduled to open at the end of this month, reported the Economic Times.
MOST NOTEWORTHY: Cypress Bioscience, Banc of America, Insulet, Taleo and Vocus Inc were today's noteworthy initiations:
Friedman Billings started shares of Cypress Biosciences Inc (NASDAQ: CYPB) with an Outperform rating and $22 target, and is positive on the company's lead product milnacipran, in Phase III studies for fibromyalgia. The firm expects a 1Q09 launch and believes the U.S. market could be as large as $7B.
Goldman resumed coverage of Bank of America Corporation (NYSE: BAC) with a Buy rating and $63 target as they believe the company has around $22.5B of unrealized gains in its strategic investment portfolio. Goldman also added BAC to their Americas Buy List.
Insulet Corporation (NASDAQ: PODD) was initiated at William Blair with an Outperform rating. The firm believes the unique features of the OmniPod will allow PODD to capture a meaningful portion of the 300,000 current insulin pumpers in the United States.
Soleil started shares of Taleo Corporation (NASDAQ: TLEO) with a Buy rating and $35 target and believes the company's recent growth pace can continue.
Shares of Vocus Inc (NASDAQ: VOCS) were also initiated at Soleil with a Buy rating and $39 target. The firm believes the company can gain share in the early stage market for public relations software given its on-demand model and low price entry point.
When most investors are down on a stock they own, they get depressed and sell.
.gif){kind=logo}
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are 
.gif){kind=logo}
.gif){kind=logo}
.gif){kind=logo}
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
