DreamWorks Animation Stock Rises After Debut of 'The Croods'

The Croods Reaching Out - H 2013
20th Century Fox

The Croods Reaching Out - H 2013

UPDATED: "The early success of 'The Croods' should help ease concerns about DreamWorks' competitive position within the CGI animation space," says one analyst.

Wall Street analysts on Monday lauded the opening of DreamWorks Animation's The Croods, which earned about $45 million in its first weekend in the U.S. They said it should help investor sentiment after the disappointing box-office performance of Rise of the Guardians.

"The early success of The Croods should help ease concerns about DreamWorks' competitive position within the CGI animation space," said Barclays Capital analyst Anthony DiClemente. "Bouncing back from a rare miss with Guardians, The Croods had a solid showing in its domestic box office debut."

Janney Montgomery analyst Tony Wible echoed that sentiment in a report entitled "Croods Conquer Estimates and Set Fatter Tail." He wrote: "The stronger open on The Croods should start to ease investor concerns about [DWA's] ability to produce new franchises."

And Lazard Capital Markets analyst Barton Crockett wrote: "DreamWorks Animation's The Croods worked. It delivered an opening weekend slightly above [our] estimates that suggests the movie should at least slightly top our estimate for a modest profit and boost confidence in shares shaken by the $87 million write-off for DWA'a last movie, Rise of the Guardians."

The stock of DreamWorks Animation was up 4.7 percent at 19.88 as of 9:50am ET. On Friday, it had closed at $18.98. Its 52-week high stands at $22.98, while its low stands at $15.90.

DiClemente, who has an "underweight" rating on DWA's stock, had projected a $42.5 million U.S. opening. "Also encouraging, the film grossed $62.6 million internationally with an extensive initial release across most territories, evidence of a strong effort from DWA's new distribution partner 20th Century Fox," he said.

He left his box office estimates unchanged, but raised his price target on the stock to $16 from $14 "to reflect less uncertainty around the feature film business."

Wible, who has a "buy" rating on DWA's stock, reiterated a previous forecast that the company was on a positive financial trajectory. "Although the company still faces headwinds tied to merchandise sales, franchise fatigue, lower DVD sales, and [foreign currency] headwinds, we see an earnings inflection point in 2014," he said.

The Croods "is pacing better than DWA's How to Train Your Dragon, which went on to gross $218 million," according to Wible. "Based on DWA's range of historical open to ultimate ratios, the film is on pacing to deliver a $119 million-$222 million U.S. box-office ultimate. We are maintaining our $170 million and $360 million estimates for U.S. and international box-office ultimate, respectively."

Crockett highlighted that the box office for the top 12 movies fell 35.3 percent this weekend.

He trimmed his first-quarter box-office forecast to a 10.6 percent decline.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai