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Well-known media analyst Richard Greenfield this morning issued a “sell” on DreamWorks Animation stock and lowered his price target to $25 from a previous $28. Because he said a Megamind write-off is now looming. “We continue to believe DWA shares are overvalued,” Greenfield says. “Our original short thesis was premised on 2011 consensus expectations being far too high. However, we now believe 2010 estimates need to come down as well. Both Megamind box office results and Shrek Forever After DVD sales are meaningfully underperforming expectations…
“We believe a $0.20-$0.25 write-off of Megamind is possible in calendar Q4, which could further reduce our 2010 EPS estimate. A Megamind write-off would also have a modest negative impact on our revised 2011 EPS estimate (as DVD earnings would not generate profits in 2011)… With Megamind finishing its domestic box office run, the film is struggling to get to our revised, below consensus $149M estimate (currently at $140M).
“Overseas, Megamind’s box office is far worse on a relative basis to prior DWA films, with only $67M of box office to-date. While the film has several markets left to open, the only major markets left are France, Mexico, Italy, Japan and the Nordic region. In the UK, through two weeks of release, Megamind has generated only $7M of box office, compared to $15M for How to Train Your Dragon, $17M for Monsters vs. Aliens. We are lowering our international box office estimate to $156M from $176M.
“We expect DreamWorks to release the Megamind DVD in late Q1 2011. Given the film’s underperformance both in the US and overseas, we suspect it will be very difficult to market. Depending on how conservative management’s DVD forecasting is, we believe DWA may need to write-down Megamind when they report Q4 2010 earnings in early 2011.
Greenfield also had warnings about another DWA title: “While Shrek Forever After generated a surprisingly healthy $737M in worldwide box office (aided by 3D pricing), the film underperformed in the U.S. Selling a sequel on DVD, especially the fourth in a series, is hard enough. Then, layer in weak reviews / poor “word of mouth” and Shrek Forever After is going to be a tough sell at retail. While we believe Shrek DVD sales skewed toward higher priced SKUs (four pack of all the Shrek films and the Shrek Forever After double pack), we believe overall unit sales were quite weak. We are reducing our Shrek DVD unit sales by 30%-plus.”
Editor-in-Chief Nikki Finke - tip her here.
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My theory on WIll Ferrell’s overall unfunniness proves right! Even in animation he’s not a box office draw! As for Shrek 4… how many times do you think you can to well?
The biggest problem this stock has is that all this value is based on one man–Katzenberg–continuing to set the agenda for this place. But what happens if he gets sick? Or, more likely, when hus taste simply isn’t as sharp as it once was–there’s no succession pkan at all.
Richard Greenfield’s observations are correct.
DWA is overpriced and underperforming. Megamind will not generate anywhere near the revenue DWA projected.
Sell, sell, sell.
no one wants to see superheros made fun of…especially in a lame movie with obnoxious american comedians who have zero international appeal.
Megamind was a piece of crap as are most Dreamworks animated films. The problem with DWA is Jeffrey Katzenberg and nothing will change until Jeffrey stops directing every film himself. He may be a great businessman but he is a lousy filmmaker and no one at DWA is big enough to tell him to back off and let the artists and directors do their job. A real shame.
I am not suprised
Whatever Challenges DWA experiences will be short-term. Deadline.com has reported DWA is going to a 2 films one year 3 the next release schedule. One hit balances this film out & many times with these content creation companies something is learned in the less than expected film that helps create a film that becomes a franchise 4 films that is more than one expected. Mr. Katzenberg Mr. Michael Eisner ( Mr. Barry Diller Proteges) ,Mr. Roy Disney & Mr. Stanley Gold lead Disney From A 2Billion$ Market Cap Company in 1984 To a 28Billion$ company in 1994 . Mr. Katzenberg was instrumental in getting Disney working with Pixar. Anyone who has seen Mr. Katzenberg actually move his chair to pitch Mr. Sumner Redstone’s left ear at a lunch or gotten a personally signed thank you note from a 500 to 1000 person plus charity event knows he is going to do whatever it takes to make very popular films that make this stock a compelling buy.
Yea, MEGAMIND is actually a romantic comedy disguised as a kid’s movie and pretty much laugh free. It is astonishingly how they just most of their ideas as Pixar movie concepts as a re-pitched. Megamind is basically the Incredibles if Mr. Incredible said he wanted to retire … but of course, beyond that – it’s like a 22-minute animated sitcom, we only need 10-minutes of ideas, we’ll just spread them out over a 80-minutes while Pixar takes 180-minutes of idas and crams them in a 120-minute movie. I will give them Kung Fu Panda was nicely done and thought out and even nice animation but other than that, after 40 movies, what have they really brought to the table? Yea, Shrek was funny but after taht, it was padding. They definitely need to realy think and read through scripts before commiting yes.
Pixar never feared them, that should be a sign. Shrek was driven into the ground, they really should have quit after the first one. That company can barely run itself and sold itself to Paramount. Soon the Dreamworks name will disappear and nobody will miss them.
Will Ferrell is on his way out of Hollywood. His routine is running tired, just like Jim Carrey before him.
Yeah, Will Ferrell is on his way out. His catalog is still huge. His business / producing ventures – Funny or Die, etc are all very popular and profitable. Last I looked, Jim Carey was still around, too. Just had a huge hit two years ago. Grow up, get real.
Makes sense. DWA product is simply not what it used to be. Also their marketing and publicity is lacksluster of late, and leaves much to be desired.
Three DWA films in one year = overexposure?
While I generally enjoy most of the animation from Dreamworks, especially Madagascar and Aliens vs Monsters, Megamind was really not very good and mostly not funny.
I like to see competition between animation studies and while PIXAR may be the king they are not the only game in town.
BUT just because Will in in a mediocre film will not guarantee any success. It was at best mildly amusing.