Analyst Michael Savner says he is reaffirming his sell rating to reflect higher-than-expected return reserves for home video units of "The Incredibles". However, he doesn't think the shortfall is indicative of a fundamental problem in the company's business.
Instead, he says it could indicate that DVD sales patterns are starting to look more like theatrical sales patterns, where there's a potential late-2005 pickup in the box office. He still feels Pixar's valuation is too lofty to be supported by fundamental trends.
Despite the shortfall, Savner ups his $1.06 2005 earnings per share estimate (which is well below the Street's $1.19), to $1.10.