DreamWorks Animation shares tumble after ‘Shrek’ film debut


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Shares of DreamWorks Animation took another drubbing Monday after a less-than-monstrous debut for ‘Shrek Forever After.’

DreamWorks shares dropped 10% to $31.31 in early morning trading after the Glendale studio reported far lower box office numbers for the final ‘Shrek’ film than investors had anticipated.


The fourth movie in the series generated an estimated $71.3 million in revenue in the U.S. and Canada this weekend, compared with $121.6 million for ‘Shrek the Third’ in 2007. What’s more, the number of people who watched the film was more than 50% less than for ‘Shrek the Third,’ when taking into account ticket price inflation and 3-D surcharges.

[Update, 1:16 p.m.: The actual weekend gross for ‘Shrek Forever After’ once Sunday ticket sales were fully calculated was $70.8 million.]

Although the film will probably still be profitable, the results stunned Wall Street analysts who had been banking on a much bigger opening. They cited several possible explanations, including audience fatigue, higher-priced 3-D tickets and a weariness with the ‘Shrek’ characters.

‘It’s a tired franchise, and they went back to the well too many times,’’ said James Marsh, an analyst with Piper Jaffray & Co,. who lowered his price target on the company’s stock to $33 from $38 and expects the film will generate $200 million domestically, compared with $325 million for ‘Shrek the Third.’ Wedbush Morgan Securities analyst Michael Pachter, who had projected the movie would bring in $120 million on its opening weekend, called it ‘somewhat disappointing given DreamWorks’ ability to secure a large number of 3-D equipped theaters.’ The film, which had a budget of about $165 million, was shown in 2,373 3-D theaters.

Nonetheless, Pachter maintained his neutral rating on the stock and a price target of $44 per share, citing the film’s staying power and lack of ‘serious competition’ until June 18, when Disney/Pixar releases ‘Toy Story 3’ in 3-D.

Like DreamWorks’ ‘How to Train Your Dragon,’ which also had a disappointing opening, the latest ‘Shrek’ film could benefit from strong audience ratings as positive word-of-mouth spreads. Market research firm CinemaScore gave the film an ‘A’ rating based on a survey of audiences who had seen the film.


-- Richard Verrier