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DreamWorks Animation stock drops after soft 'Puss in Boots' opening

November 01, 2011|By Richard Verrier, Los Angeles Times

Shares of DreamWorks Animation SKG Inc. dropped Monday after the company's latest film, "Puss in Boots," had a softer-than-expected opening.

The Glendale company's shares fell 8% on Monday as investors responded coolly to the box-office launch of "Puss in Boots," a spinoff of the studio's hit "Shrek" films that features the voices of Antonio Banderas and Salma Hayek.

With a production budget of about $130 million, "Puss in Boots" generated $34.1 million in ticket sales over the weekend. That was enough for No. 1 at the box office but well below the $40 million to $45 million that most Wall Street analysts had forecast.

"This is the lowest opening weekend of any DWA CG animated feature since 'Antz' in 1998," Doug Creutz, an analyst with Cowen & Co., wrote in a report to investors. "We believe the performance of 'Puss' is further evidence that increasing competition in the animated film space significantly degraded the domestic box-office potential for individual animated films."

In a research note titled "Hairball," Creutz revised his domestic box-office estimate for "Puss in Boots" to $120 million from $154 million but maintained his neutral rating on DreamWorks' stock.

Richard Greenfield, an analyst with BTIG Research, who has a "sell" rating on the stock, said that wintry weather in the Northeast may have hurt the opening of "Puss in Boots," but he wrote in a blog that the film's opening weekend in the U.S. and Canada was "well below our and consensus expectations."

Even if the film has some staying power, it "may have difficulty reaching our $157-million domestic box-office estimate, which is well below consensus," Greenfield said.

DreamWorks Animation, which releases at least two films a year, remains a market leader in the industry but has been squeezed by an industrywide slowdown in DVD sales and growing competition from other studios in the family film business.

In its most recent quarter, DreamWorks performed better than expected, although its profit fell 51%, which the studio attributed to the timing of its releases.

The company's shares closed Monday at $18.55, down 50% from its 52-week high of $37.74 in November.

DreamWorks executives declined to comment on the investor reports but cited the effect of storms in the Northeast and the World Series on Friday on the opening of "Puss in Boots" and predicted the movie would build momentum.

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