DreamWorks Animation Stock Declines as Analysts Debate Weak 'Turbo' Start


"A writedown remains possible over the next few quarters depending on how things play out," says one observer.

The stock of DreamWorks Animation was down more than 6 percent in early Monday trading as Wall Street observers debated the impact that the weak weekend opening of Turbo would have on the company's financials.

The stock was down 6.4 percent at $23.32 as of 11:30 a.m. ET.

"DreamWorks Animation's Turbo had a big domestic box office miss," Lazard Capital Markets analyst Barton Crockett wrote in a report. As a result, he cut his U.S. revenue total estimate to $100 million from $166 million.

"However, the opening in 25 percent of international markets pulled in 1.6 times the box office of Croods, leading us to assume a better international total than we had formerly expected," he emphasized. Plus, an earnings lift from a new Netflix deal and a content-licensing deal in Germany would also help "mitigate Turbo's domestic miss," Crockett said.

Cowen analyst Doug Creutz similarly said "Turbo got off to a very soft start." And he predicted investors would take note. "We expect the stock to react negatively over the next couple of weeks as the impact of two nonprofitable films in three releases settles in," he said.

Creutz has a "market perform" rating on the stock.

Will Turbo lead to a writedown for DWA? "We do not expect DWA to take a writedown on their second-quarter earnings call in two weeks given that much of Turbo's ultimate revenue performance remains in the future," Creutz said. "However, we think a writedown remains possible over the next few quarters depending on how things play out."

Turbo will benefit from lower costs and likely higher revenue than Rise of the Guardians though, he suggested.

Turbo earned $22.5 million across 28 countries in its opening weekend, including an estimated $8.5 million in Russia, $3.4 million in Mexico and $1.9 million in Brazil, according to Creutz. "In these territories, Turbo's performance most resembles that of How to Train Your Dragon, which went on to gross $275 million in international box office," he said.

He cut his worldwide box office estimate to $329 million, including estimated $93 million domestic and $236 million international takes.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai