Shares of DreamWorks Animation (DWA) shot up 8% in trading on Monday, March 30 after its latest film Home had a surprisingly successful opening weekend.
Home raked in $54 million in domestic box office revenue, beating DreamWorks’s own forecast of $35 million and taking third place as the company’s biggest non-sequel opening.
The animation studio has been struggling to keep up with competitors since the end of its wildly successful Shrek franchise in 2007. Four of the six latest films from DreamWorks lost money and generated negative cash-flow since 2011. Most recently, the company took a significant hit when the latest sequel of its Madagascar franchise, Penguins of Madagascar, brought in a mere $36 million in domestic box office revenue over the five-day Thanksgiving holiday weekend in 2014.
Wall Street was skeptical of the revenue potential for Home, especially since it’s the only film DreamWorks is releasing this year and the major competition it faced from Walt Disney’s Cinderella and Avengers: Age of Ultron.
Analysts had mixed reviews on DreamWorks following Home’s better than expected opening weekend.
On March 30th, Topeka Capital analyst David Miller maintained a Sell rating on DreamWorks with a $17 price target, citing thatHome’s opening weekend revenue was “a huge upside surprise” but attributes consumers interest in the film to unseasonably cold weather on the east coast.
David Miller has an overall success rate of 69% recommending stocks and a +13.8% average return per recommendation.
Similarly on March 30th, FBR Capital analyst Barton Crockett reiterated an Underperform rating on DreamWorks, but raised his price target on the stock from $14 to $18. He noted, “Despite Home’s better-than-expected opening… we do not believe that DreamWorks’ average movie performance is supportive of its high earnings multiples. Given the studio’s write-downs on four of its last six movies, profitability on one movie, while a near-term positive, is not enough.”
Overall, Barton Crockett has a 67% success rate recommending stocks and a +14.5% average return per recommendation.
On the other hand, Morgan Stanley analyst Ryan Fiftal maintained an Overweight rating on DreamWorks on March 30, citing thatHome has “the foundation of a new franchise” and that the company is shifting into an “intellectual property creation and monetization engine.”
Ryan Fiftal has an overall success rate of 60% recommending stocks and a +13.4% average return per recommendation.
On average, the top analyst consensus for DreamWorks on TipRanks is Hold.
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