DreamWorks Animation stock drops, logs 52-week low

DreamWorks sees its stock hit a 52-week low after layoffs announcement

DreamWorks Animation stock tumbled after the studio announced layoffs and over $300 million in writedowns and charges.

The stock fell $1.95 or 9.5% to $19.27 in trading on Friday. Earlier in the session, DreamWorks stock hit a new 52-week low of $18.30 after closing Thursday at $21.31.

The Glendale animated film giant on Thursday unveiled plans to cut 500 jobs, shake up top management and scale back its film production, as well as close its studio in Redwood City in Northern California.

The moves follow a string of box-office disappointments that have resulted in major writedowns on films including "Turbo" and "Penguins of Madagascar." Wall Street has been critical of DreamWorks for not being able to replicate the success that it once had with the "Shrek" franchise.

Cowen & Co. media analyst Doug Creutz downgraded his outlook for the company to "underperform."

In his report, "Downgrade: Creativity and Restructuring Don't Mix," Creutz links DreamWorks' last brush with layoffs in 2013 and its poor film performance.

"While we can not prove cause and effect, we think the most recent round of layoffs risks further worsening DWA's competitive position in the very competitive animated film market," he wrote.

He also cautions that, in relation to the company's liquidity, DreamWorks is in a "precarious position." He notes that the company has $500 million in debt and $50 million in cash on the balance sheet, and faced upcoming restructing costs of $110 million -- and has just one film slated for 2015, "Home."

BTIG analyst Rich Greenfield also detailed a grim outlook, saying DreamWorks is in a "dire situation." His report to clients issued on Friday was titled, "Could DreamWorks Animation Be Insolvent by 2019?"

He asserts that the company has "significantly overextended" itself, and forewarns that "they are skating on increasingly thin ice."

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