Janney Montgomery Scott Keeps 'Sell' on DreamWorks Animation (DWA); New Deal Has More Stategic Benefit, Less Financial

August 21, 2012 9:19 AM EDT
Get Alerts DWA Hot Sheet
Price: $40.97 --0%

Rating Summary:
    3 Buy, 9 Hold, 8 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 19 | Down: 19 | New: 13
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Janney Montgomery Scott maintains a 'Sell' on DreamWorks Animation (NASDAQ: DWA) price target of $14.50.

Analyst, Tony Wible, said, "We rate DWA SELL, as we are concerned about the decay in film performance, FX headwinds, and the possible cannibalization from the Netflix (Nasdaq: NFLX) deal. These concerns are exacerbated by the steep decline in DWA's DVD sales but are partly tempered by better international demand, the near term boost from NFLX catalog sales, strong non-film performance, and the accretion of the Classic Media deal. On balance, we believe estimates still need to move lower and see the risk/reward on the stock in favor of a Sell rating."

On yesterday's announcement, Wible, said, "DWA signed a distribution agreement with News Corp's (Nasdaq: NWSA) Twentieth Century Fox for the domestic and international theatrical distribution of DWA's animated feature films from 2013 (The Croods) through the end of 2017... The distribution fee will remain at 8% for most of the release windows, which is in line with the current rate...The lack of material savings validates our view that it would be difficult for DWA to lower the rate below 8% as distributors already run a thin margin at this level...We believe the strategic benefits are far greater than the economic benefits...Overall, we think the Fox deal still represents a good deal for DWA."

For an analyst ratings summary and ratings history on DreamWorks Animation click here. For more ratings news on DreamWorks Animation click here.

Shares of DreamWorks Animation closed at $17.72 yesterday.

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