Investors are casting a jaundiced eye on last night’s news about DreamWorks Animation’s delayed release of Mr. Peabody and Sherman (to Spring 2014 from 2013), and the removal of Me & My Shadow from the 2014 list. The stock is down 3.8% in mid-afternoon trading to $16.76, and has sold today for as little $16.26. Piper Jaffray’s James Marsh downgraded the company to “Neutral,” and reduced his price target to $18 from $25. He’s concerned because “this is the second time the company has backed away from a more ambitious three film per year slate and all of its economic benefits.” What’s more, it means that there’s additional pressure for DreamWorks Animation to succeed this year with The Croods and Turbo. Following the lower-than-expected box office for Rise Of The Guardians, “a disappointment by Croods sets in place a trend.” He notes that Croods is “tracking light” while “Turbo faces a tough competitive environment this summer.” READ MORE »
That could result in a nice pop for DreamWorks Animation shares — which closed at $18.01 on Friday — all things being equal. The nearly $60M domestic box office sales for Madagascar 3: Europe’s Most Wanted were well ahead of the $45M predicted by Barclays Equity Research analyst Anthony DiClemente. This morning he raised his 2012 earnings per share estimate for DreamWorks to 95 cents a share from 93 cents — but left his “underweight” recommendation and $15 target price unchanged. “While the weekend take fell just short of Madagascar 2’s $63M haul in 2008, it was still a very impressive result,” he says. He now forecasts that Mad 3 will generate $175M at domestic box offices, up from his previous $165M, with international box office of $420M, up from $413M. Janney Capital Markets’ Tony Wible also is impressed by DreamWorks “first film in years to beat (U.S. box office) opening expectations” — which he says distributor Paramount “had been talking down” to $45M. He, too, raised his EPS estimates a penny to 77 cents for the current quarter and $1.17 for the year. Wible’s concerned that Mad 3‘s “run may be short-lived.”
UPDATE, 2:15 PM: No update on the big question DreamWorks Animation faces: Who will distribute its films beginning next year, when its current deal with Paramount expires? The process to decide that “will begin in June” after Madagascar 3 is out, CEO Jeffrey Katzenberg says. “We anticipate it being concluded no later than Labor Day.” He added that “all options are on the table” including self-distribution — something that Katzenberg says the company is “fully exploring.” The value of any deal DreamWorks makes shouldn’t be judged just by the distribution fee, he says; there could be synergies like the ones DreamWorks has with Nickelodeon.
Wall Street clawed 7.8% from the company’s stock price, which ended the day at $18.55, following Puss In Boots’ lower-than-expected $34M opening weekend. Analysts acknowledged that the film suffered from the blizzard that hit the Northeast as …