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Analyst Downgrades DreamWorks, Sees Weak 'Shrek'

Tuesday, 18 May 2010 03:44 PM

An analyst downgraded DreamWorks Animation SKG Inc. on Tuesday, predicting lower-than-expected box office receipts for its "Shrek Forever After" animated film.

Thomas Weisel analyst Benjamin Mogil lowered his rating on the movie studio to "Market Weight" from "Overweight" and reduced his share price target to $38 from $44.

He now expects the movie to bring in $315 million in the U.S., down from a previous estimate of $375 million. Mogil cut his worldwide box office estimate to $756 million from $900 million.

Mogil said a check of interest in the movie indicates that Shrek would bring in $75 million to $90 million during its opening weekend — far lower than the $110 million analysts were expecting.

The analyst acknowledged that kids' movies are tough to track, since attendance tends to be spread out and therefore opening weekend numbers might not always represent how much money the film would haul in over time.

But a delayed box office bonanza is more prevalent in new film franchises than sequels, he said.

Mogil said typically one movie doesn't result in a stock downgrade, but the fourth movie in the "Shrek" series is important to DreamWorks because it anchors the year's earnings forecast and affects the movie spin off, "Puss In Boots" in 2011.

Shares of DreamWorks, based in Glendale, Calif., fell $1.63, or 4.5 percent, to $34.64 in afternoon trading. The stock has ranged from $23.53 to $44.77 over the past year.

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