DreamWorks Animation Shares Drop on Heavy Volume Amid Looming Layoffs
The stock dropped 4 percent to $16.75 but managed to stay above a 52-week low.
Shares of DreamWorks Animation fell 4 percent on volume three times higher than average Wednesday as investors digested news that the company would delay at least one release and lay off employees.
The company said late Tuesday that Mr. Peabody & Sherman would be delayed four months, taking the spot previously held by Me & My Shadow, which the company threw back into the development process. Shadow, which stars Kate Hudson and Josh Gad, has been taken off the schedule indefinitely, CEO Jeffrey Katzenberg said.
Sources told The Hollywood Reporter that the studio plans to lay off an unspecified number of staffers in large part due to the weaker-than-expected performance of Rise of the Guardians, a film with a $145 million production budget that has taken in $298 million worldwide since opening in the U.S. in November. The jobs lost at the Glendale-based studio could reach 400, one source told THR.
The reshuffling of release dates means DWA will have only two films this year, The Croods and Turbo, and at least three next year.
Despite Wall Street's reaction Wednesday -- shares fell 67 cents to $16.75 -- some analysts maintained their bullish view on the stock.
"We obviously see revenues/profit move from 2013 to 2014," Janney Capital Markets analyst Tony Wible wrote in reference to the delay of Peabody. "Overall, this move will reduce 2013 and sustain the pressure on DWA earnings into next year."
Wible, though, said there's the possibility now of four films in 2014, assuming Shadow isn't killed off entirely. The analyst is also bullish on DWA's distribution arrangement with News Corp., its acquisition of Classic Media and its joint venture Oriental DreamWorks.
Wible maintained a "buy" recommendation on DWA and says its fair value is $22 a share. The stock has traded as low as $16.04 in the past 52 weeks and as high as $22.98.
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