Lion's Gate (LGF)

We are initiating coverage of Lion&#39;s Gate (<a href=http://www.zacks.com/research/report.php?type=main&t=LGF>LGF</a>) with a Buy rating. <P ALIGN=&quot;left&quot;> With a strong track record of producing critically acclaimed small and mid-budget specialty films, we think Lion s Gate is well positioned to increase market share as the big studios continue to shrink production of specialty films. Further Lion&#39;s Gate&#39;s large film library should, in our view, spur renewed growth in home entertainment revenue in 2H FY10 as consumer adoption of the Blu Ray format accelerates. <P ALIGN=&quot;left&quot;> Although in the coming months we expect the economy and film slate timing to weigh on revenues and EBITDA in all segments, we think the current stock price undervalues LGF s film library, which ultimately generates 80% of the company&#39;s free cash flow. <P ALIGN=&quot;left&quot;>

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