LION

Lionsgate Studios ($LION) Emerges as Undervalued Opportunity Amid $58M Insider Buying Spree

07/10/2025 05:24

Lionsgate Studios Corp ($LION) has caught investors' attention as a major shareholder continues aggressive buying despite the stock's over 26% decline this year. The company, which spun off from STARZ in May 2025, focuses exclusively on film and television production for global audiences. The most notable activity comes from Liberty 77 Capital L.P., which has been consistently accumulating shares. From May 28 to July 9, this major shareholder purchased approximately 8.4 million shares across eight transactions, totaling around $58 million. The buying spree was particularly intense during May 28-29, when they acquired $49 million worth of shares in just two days, and continued into July with additional purchases. Average purchase prices ranged from $5.59 to $6.65 per share, showing consistent accumulation near current levels of $5.61. Lionsgate Studios presents clear undervaluation signals. The price-to-sales ratio of 0.40 stands well below the entertainment industry average of 1.0-3.0, while the enterprise value-to-EBITDA ratio of 5.79 appears relatively attractive. With a forward P/E of 14.20, the current share price may not fully reflect the company's intrinsic value, suggesting potential upside opportunity. The company's business outlook shows promising elements. The September 2024 partnership with AI specialist Runway aims to enhance creative efficiency in film and TV production through AI technology, potentially reducing costs and improving competitiveness. The spin-off from STARZ also allows management to focus solely on content creation, which should improve operational efficiency. However, risk factors cannot be ignored. Recent quarterly results showed revenue beating expectations but earnings per share (EPS) falling short. Q1 adjusted EPS of 21 cents significantly missed analyst expectations of 41 cents, raising profitability concerns. Additionally, potential U.S. tariffs on foreign-made movies could increase production costs and pressure margins. The key catalyst for investors will be the July 31 earnings report, marking the first comprehensive financial disclosure since the spin-off. This report is expected to provide concrete guidance on business direction and profitability improvement plans as an independent entity. Particular attention will focus on tangible results from the AI partnership and future content production pipeline guidance. Evaluating $LION's investment appeal, the combination of undervaluation and persistent insider buying suggests potential bottom-fishing opportunity. However, near-term performance will depend on earnings improvement and broader industry challenges. Conservative investors might consider waiting for July 31 results before making investment decisions, while growth-oriented investors could explore dollar-cost averaging at current price levels.