Lions Gate Stock Plunges as ‘Divergent’ Wins at Box Office
In a world where sanity prevailed, a film that scored big at the box office on its way to a huge profit would be a feather in a movie studio’s cap. Lions Gate Films (NYSE:LGF) appeared to have such a picture on its hands with Divergent, except Wall Street doesn’t see the film’s huge opening night as a symbol of strength. Lions Gate ended Friday trading in New York down 8 percent (14 percent on the week) as a result of lofty expectations and reviews that didn’t declare the picture an outright sensation.
The curious case of Divergent began over the weekend of March 14 when reviewers had their first look at the film ahead of its March 21 release. Lions Gate began shedding points as soon as trading opened on March 17, culminating in the report by Zacks that noted Divergent reviews were hurting the stock. March 21 trading was even harsher for Lions Gate, which fell nearly 8 percent by the end of the day.
The Street reported the film’s weak consensus on Rotten Tomatoes by March 20, though the numbers continued to grow in favor of Divergent. A video report accompanying the story about Divergent’s struggles noted a “26 percent” approval rating on Rotten Tomatoes, while the print report put the rising number at “34 percent.” At press time on March 21, Divergent had vaulted to 42 percent with 79 percent of audiences liking it.
The audience approval was very much reflected in the $4.9 million notched in the film’s March 20 pre-opening. As Deadline noted, that showing was better than Despicable Me 2 ($4.7 million) and blew away the opening of World War Z ($3.6 million). Why then the bum rap for Lions Gate and Divergent?
Apparently, the knock on Divergent is “it’s no Hunger Games.” Slated to gross between $50 million and $60 million on its opening weekend, most Hollywood observers expect Divergent to steamroll through the mark of its $80 million budget and end up grossing about $150 million.
In other words, Divergent is likely to become a smashing success for Lions Gate, which sent out word on March 21 that the franchise’s second film, Insurgent, was officially getting the green light. It turns out someone likes money after all.
According to The Wrap, Lions Gate has been the victim of a lofty bar dinging its stock price in the recent past. The Hunger Games, the very film on which the great expectations of Divergent are based, delivered “only” $161.1 million in its opening weekend. Analysts expected more, and shares of Lions Gate plummeted 10 percent as a result.