Stocks to Watch Friday: 'Hunger Games' Stifles Lions Gate's Roar

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Hunger Games
The Hunger Games may have been a springtime smash at the box office, but it wasn't enough to get Lions Gate Films (LGF) to roar.

The film distributor posted a surprising quarterly loss on Thursday night, after marketing costs related to The Hunger Games, Cabin in the Woods, and other theatrical releases more than ate up the period's potential profitability.

Analysts should start reconsidering their models. This is the third quarter in a row that Wall Street expected a profit out of Lions Gate Films, only to be treated to a chunky deficit instead.

Lions Gate Films will be fine. Revenue did soar 81% to $471.8 million during the quarter. Perhaps more importantly, two-thirds of the first Hunger Games movie's profits have yet to be realized. That will play itself out in the coming quarters as the film works its way through the distribution channels.

Now it's simply a manner of getting Wall Street on the same page. Maybe analysts should review Lions Gate Films' What to Expect When You're Expecting for inspiration. Given how big a box office dud the studio's romantic comedy was this year, somebody needs to watch it.

Other Stocks to Watch

  • Dunkin' Brands (DNKN), Dunkin' Donuts parent, revealed that it will hold a secondary offering to let early investors unload 21 million shares of stock. Dunkin' will also buy 15 million shares. No one likes to see these jelly-filled secondary offerings, but at least Dunkin' is doing its part to eat some of its own cooking with the repurchases to keep float in check.
  • Ubiquiti Networks (UBNT) is shaping up to be one of Friday's biggest losers after posting stunning guidance for the current quarter. The wireless equipment company is pointing to terminated distributors selling counterfeit versions of the company's flagship AirMax product. The end result is that Ubiquiti will earn roughly half as much as Wall Street was expecting on a sharp sequential dip in revenue. The moral of the story here is to keep your distributors happy, even after you let them go.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended writing naked calls on Dunkin' Brands Group.


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