Lionsgate shares slip after weak opening for ‘Allegiant’

Lionsgate’s shares took a tumble after the disappointing opening of its movie “Allegiant” raised concerns about the studio’s performance.

The stock fell 3% to $21.93 in midday trading Monday on Wall Street. So far this year, the shares have declined about 32%.

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“Allegiant,” the third film in the Santa Monica studio’s “Divergent” dystopian young-adult franchise, opened with an estimated $29 million in U.S.-Canada through Sunday. That was 44% lower than the opening for last year’s “Insurgent.”

The weak result is a troubling sign for Lionsgate, which rose to the ranks of a mini-major studio thanks to youth-skewing series such as “The Hunger Games” and “The Twilight Saga.”

But the studio has struggled with new movies in recent months, including the $140-million CGI action film “Gods of Egypt” and smaller offerings such as “The Perfect Match” and “The Choice.”

“‘Allegiant’s’ performance ends a tough theatrical quarter for the company,” said Cowen & Co. analyst Doug Creutz in a research report. “We continue to think Lionsgate’s film studio is in a difficult position with box office concentrating in fewer, bigger films.”

The “Divergent” series was supposed to alleviate investor concerns that the studio’s profits would fall after “The Hunger Games” series ran its course. But that bullish case is looking less convincing now, according to Benjamin Mogil, an analyst at Stifel.

Mogil downgraded his rating on the stock to “hold,” writing in a research report that the weakness of the box office for “Allegiant” could put pressure on Lionsgate’s earnings. The company has another “Divergent” movie planned for next year.

“With ‘Allegiant’ now faltering, the impact going forward is material and more importantly brings into question how deep the young adult market is,” Mogil said.

There are signs that the consumer appetite for young adult dystopian movies is waning. The fourth and final “Hunger Games” picture did worse than expected domestically, and Sony’s attempt to adapt “The 5th Wave” resulted is paltry U.S. box-office.

However, analysts point out that television production continues to be a strong source of growth for Lionsgate.

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