DreamWorks Animation stock has been on a publicly traded roller-coaster ride over the last eight months, with Wall Street driving up the stock after successful theatrical runs, then sucking it into steep valleys after disappointing openings.
On Monday, one investment firm advised its clients to get off the ride.
"We continue to prefer stocks with exposure to TV and advertising-driven assets with higher growth and less earnings volatility than DWA," read a Morgan Stanley report, labeling DreamWorks Animation stock "underweight" compared to its trading price.
The latest downturn came with the studio's latest 3D-animated film, "Megamind," stalling out at the box office short of Street projections, and "How to Train Your Dragon" DVD sales lagging behind forecasts.
For DreamWorks, which opted not to comment to TheWrap, the Morgan Stanley lashing probably seemed like business as usual, with the company's stock price peaking at around $44 per share in late March, then dipping below $28 per unit in mid-July, before closing Tuesday at just over $31 per share.
That's a fluctuation in share price of over 36 percent. No other big, publicly traded media company has come close to that kind of stock volatility of late.
"This is not Disney," noted Marla Backer, an analyst with Hudson Square Research. "It's not surprising that for a small studio that releases two to three films each year, there would be a micro-focus on each film it puts out."
"You only have a limited number of data points to go off of with these guys," added another investment analyst.
DreamWorks has faced overt pressure from Wall Street to acquire, merge with or be bought out by the kinds of entities that could broaden its asset portfolio beyond just 3D-animated movies.
But the company clearly seems to prefer growing these broader revenue streams itself.
For example, DWA co-produces with Nickelodeon the cable TV hit "The Penguins of Madagascar" and will soon co-produce a TV version of "How to Train Your Dragon" with Turner for Cartoon Network.
In September, when DreamWorks reported a 40 percent increase in third-quarter revenue to about $190 million, nearly a quarter of it came from "library and other revenue."
"They've moved pretty quickly to move their IP onto television," Backer noted.
But apparently not quick enough for most on The Street, which is still focused on the theatrical and DVD performance of DreamWork's movies.
And the bar is high.
On "Megamind," for example, Morgan Stanley lowered its estimate for total domestic box-office revenue from $215 million to a still-lofty $175 million, while dropping the 3D-animated film's foreign theatrical revenue projection from $295 million to $235 million.
And even that might be too high. With "Megamind" about to lose the bulk of its 3D exhibition to a holiday onslaught of 3D films that started with Disney's Wednesday release of "Tangled," even $175 million domestically seems like a stretch.
