Sanford Bernstein media analyst Todd Juenger initiated coverage of Lionsgate Entertainment with an “outperform” rating and a $48 price target, adding that the motion picture and television producer is a “structural winner,” benefitting from the market turmoil that is hurting traditional TV networks.

In a note to clients, Juenger said the structural changes that are hurting networks are helping studios – as audiences fall, networks commission more original content from studios.

“Studios are nothing more than factories that manufacture a product called ‘Movies’ and ‘TV Shows,’ Juenger wrote. “Those factories are receiving more orders than ever, and there are very few limits to production capacity.”

Juenger’s 12-month price target represents a 43% premium to its Dec. 14 close of $33.47 per share.

Juenger has been critical of the prospects of some content networks which have struggled with slipping ratings, but said Lionsgate has an advantage because it is an independent studio – there is no conflict in selling to networks and SVOD providers alike. Because TV revenue makes up a smaller percentage of total sales than its peers, it has ample room to grow that segment.  

Fueling that optimism are Lionsgate’s movie strategy – it pre-licenses foreign exhibition rights at predetermined prices;  has carved out a position as the “go-to” studio for young adult movies (Hunger Games and Twilight series’) and has a strong TV business.

Juenger wrote the TV business is poised for significant growth in the next few years as it enters first cycle syndication for a number of titles, including ABC hit Nashville and through its Pilgrim Studios investment, which is growing rapidly and gives them a foothold in the reality TV genre.   

Juenger estimates Lionsgate can grow earnings at a 25% compound annual growth rate (CAGR) over the next three years.