Analyst downgrades DreamWorks ani stock

Goldman Sachs analyst cites 'ogre-saturation'

NEW YORK -- One of the biggest DreamWorks Animation bulls suggested Wednesday that investors take a breather on the stock.

Goldman Sachs analyst Ingrid Chung downgraded the stock from "buy" to "neutral" with a $35 six-month price target, citing "ogre-saturation" or "franchise over-monetization."

"The 'Shrek Forever After' (Shrek 4) experience demonstrates that DWA must walk a fine line between monetizing its franchise content over multiple platforms and over-saturating the market as we believe it did with the 'Shrek' franchise," Chung wrote in a report.

She lowered her estimates for "Shrek 4" -- to $250 million in domestic and $375 million in international boxoffice, down from $325 million and $600 million, respectively -- and made adjustments for other films. All this reduced her earnings estimate.

Chung also said that positive catalysts for DWA shares, possibly next film release "Megamind," even though she didn't mention any specific one, are several months away, and she said Disney/Pixar's "Toy Story 3's" expected success over the next couple of months could be "negatively impacting DWA shares."

Janney Montgomery Scott analyst Tony Wible also weighed in on DWA on Wednesday.

He had downgraded the stock to "neutral" in March.

"We do not believe the Street estimates adequately discount weaker performance on 'Shrek' and 'Dragon' and the absence of a third film next year," he reiterated a point he had made before adding: "The stock largely reflects the disappointments; however, we contend that growth may be more challenged than some expect."
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