'Shrek 3' lifts DWA to higher ground
EmptyThe same ogre that once upon a time had investors shunning DreamWorks Animation now has them giddy.
"Shrek the Third" is performing so well that Goldman Sachs analyst Anthony Noto has raised his earnings per share estimate on DWA. And, while he didn't raise his $37 price target on the stock, he did call that goal "conservative."
DWA posted quarterly earnings July 31 when the stock traded at $31. It hit a new 52-week high the next day and closed Monday at $32.97.
Noto lifted his EPS estimate to $2.10 from $2.01, and he upped his next-year EPS estimate to $2.20 from $2.16.
"Shrek the Third" has taken in $320 million at the domestic boxoffice and $400 million internationally, with Italy and other territories yet to be tapped, so Noto added $25 million to his international forecast, bringing it to $425 million.
He did, however, lessen his forecast for consumer products based on the upcoming "Bee Movie" after DWA execs cautioned analysts not to expect the same kind of performance from an original film as it gets from a sequel -- in terms of toys and other licensed goods sold, that is.
The embrace of "Shrek the Third" comes in stark contrast to the way "Shrek 2" was pilloried a few years ago when DWA said DVD sales were falling short, even though a whopping 41 million units -- at least -- have been sold to date.
That revelation in 2005 had DWA shares sinking in a swamp, and when Pixar said a month later that it wasn't selling as many "The Incredibles" DVDs as many had thought it would, all of Hollywood took notice.
But that was then. Now, Pixar has been sold to the Walt Disney Co. for a healthy premium and DWA is thriving once again -- so much so that even Standard & Poor's analyst Tuna Amobi, who rates the stock a "hold," had to at least raise his price target by $3 to $35.
And Michael Savner, an analyst at Banc of America who also upped his target by $3, now sees DWA shares trading around $40 over the course of a year.
That goal could be exceeded by about $2, he said, if DWA steps up its share repurchasing. The analyst's comment was prescient, since DWA said Monday it will increase its repurchase program. But the company also said that Paul Allen will sell about 10 million shares to the public, causing after-hours selling Monday.