DreamWorks shares rise on analyst upgrade
LOS ANGELES (AP) — Shares of "Kung Fu Panda" maker DreamWorks Animation SKG Inc. rose Thursday after an analyst raised his rating on the movie studio, saying a string of recent deals will benefit it beginning next year.
THE SPARK: Janney analyst Tony Wible raised his rating on DreamWorks Animation to "Neutral" from "Sell." He cited a number of recent deals, including a new five-year distribution agreement with News Corp.'s 20th Century Fox, which will save the studio money.
Also, Wible noted the film slate announced two weeks ago showed that the studio will release three movies each year in 2013, 2014 and 2015. That's up from a release of two or three a year.
In addition, DreamWorks is examining the possibility of starting its own TV network, and it looks to benefit from a $155 million acquisition of Classic Media, the custodian of such popular movie and TV shows as "Casper the Friendly Ghost," ''Lassie," ''Rocky & Bullwinkle" and "The Lone Ranger."
DreamWorks has also launched a joint venture in China called Oriental DreamWorks, which will produce "Kung Fu Panda 3" and develop an entertainment district in Shanghai.
What's more, DreamWorks' November release "Rise of the Guardians" is "tracking better than expected," Wible said, meaning that audience buzz ahead of the opening suggests a strong showing at the box office.
THE BIG PICTURE: DreamWorks Animation produces a few big-budget computer animated movies per year as well as some TV specials based on characters it has launched on the big screen. Recently the company's shares have suffered from concerns about the declining sales of home movies. That's why expansion into new businesses is seen as crucial.
THE ANALYSIS: Wible said that sentiment towards the company may improve closer to the release of "Guardians" on Nov. 21 as investors realize its potential to become a hit.
Wible raised his fair value estimate on the shares to $19 from $14.50.
SHARE ACTION: Shares rose 72 cents, or 4.1 percent, to $18.43 in afternoon trading Thursday. The stock has ranged from $16.34 to $21.01 in the last 52 weeks.