Analyst: 'Mr. Peabody & Sherman' May Cause $84 Million Write-Down at DreamWorks Animation
Shares of DreamWorks Animation fell on Monday as Wall Street analysts weighed in on the performance of the studio's newest release.
Wall Street analysts were taking potshots at DreamWorks Animation on Monday after Mr. Peabody & Sherman raked in a lackluster $32.5 million over the weekend, causing the stock to drop 1.4 percent while the S&P 500 was about flat.
Stern Agee analyst Vasily Karasyov predicts Peabody will eventually earn $310 million at the global box office, which would translate to an $84 million write-down. Karasyov has an "underperform" rating on DWA and $17 price target, whereas shares closed at $29.05 on Monday.
"DWA's latest release is on track to become the third original title of the last four to lose money," Karasyov wrote in a note to clients on Monday. The analyst said he needs to revise down his estimates for future original releases because "the appeal of the properties created by DWA is declining."
Karasyov figures that the last four original titles -- Rise of the Guardians, The Croods, Turbo and Peabody -- have lost DWA a combined $159 million.
Meanwhile, analysts at Cowen and Co. reduced their price target on DWA to $21 from $35 previously. But on Sunday, analyst Eric Wold at B. Riley raised his price target to $37 from $32 and upgraded the stock to "buy" because shares are down 11 percent since Jan. 30.
Wold is bullish in part because DWA's focus for the next 18 months will be on "known franchises," starting with How to Train Your Dragon 2 in June, then Penguins of Madagascar next March and Kung Fu Panda 3 in December 2015.
"We are increasingly optimistic on the potential for How to Train Your Dragon 2, given that it will enjoy the pent-up demand benefit from nine weeks without a major animated title release beforehand (the prior being Rio 2 on April 11)," Wold wrote on Sunday.