DreamWorks Animation is nursing one heck of a Thanksgiving weekend hangover.
This pounding headache is wholly attributable to the anemic opening of the studio's latest big-budget offering, "Rise of the Guardians." Produced at a cost of $145 million, the CG-animated offering eked out $32.6 million over the five-day holiday. It was one of the worst debuts for a DreamWorks Animation film in recent history, even as the box office overall shattered Thanksgiving records.
Analysts now say that the film faces a steep climb to profitability. As of noon ET, the company's stock had fallen more than 5 percent to $17.09 per share.
There is a bright side, some analysts argue, because the lackluster debut has tempered investors' expectations.
"It’s bad, in the sense that it’s probably one of the very few films DreamWorks will end up taking a loss on," Tony Wible, an analyst at Janney Montgomery Scott, told TheWrap. "The good news for the stock is that expectations have been flushed out and reset at a new level."
"They had low expectations going into the week and they're lower now and there is only one way their expectation can go from here," he added.
A spokeswoman for DreamWorks Animation declined to comment for this article.
Ben Mogil an analyst at Stifel Nicolaus, wrote that domestically the film is likely to gross $125 million, which will make it difficult to recoup the production costs and the $80 million he estimates the studio spent publicizing the film.
"This reduction, coupled with a slight reduction in our domestic DVD expectations, leads the title to most likely generate a loss for the company," Mogil wrote in a note.
That will mean that barring a holiday miracle, "Rise of the Guardians" will fall far short of the $216.4 million that the studio's most recent release, "Madagascar 3," generated domestically or even the $148.4 million domestic gross racked up by "Megamind," another recent film that was not a sequel. But those films were able to pick up some profits abroad, with "Madagascar 3" generating an additional $524.1 million internationally and "Megamind" netting $173.5 million internationally.
Both Mogil and Wible said that since "Rise of the Guardians" centers on mythical figures like Santa Claus and the Easter Bunny that are not embraced across wide swaths of the globe, the film will have a harder time attracting foreign audiences.
For analysts, the tepid debut of "Rise of the Guardians" is further evidence that DreamWorks Animation desperately needs to diversify beyond its one to two film releases annually. To its credit, the company is following that prescription, announcing that it will release at least one more film per year starting next year. It has also unveiled plans to build an entertainment district with shops and theaters in Shanghai as part of a Chinese joint venture and will release television shows and animated films targeted to China.
"By 2014, expectations for DreamWorks will be much higher than where we are at today," Wible said. "But until that plays out, there will be a lot of pressure on the stock."
What DreamWorks Animation is undoubtedly hoping is that "Rise of the Guardians" will follow in the footsteps of "How to Train Your Dragon," another animated film that was a slow starter when it hit theaters in spring 2010. Although it premiered to a disappointing $43.7 million, the critically adored "Dragon" eventually grossed $494.8 million globally and spawned a sequel.
"Before we write this film off, we need to look back to other films like 'Dragon,' that held incredibly well on weekend two," Marla Backer, an analyst at Research Associates, said. "If 'Guardians' has a strong second weekend, we'll need to rethink things."
What could help "Rise of the Guardians" pick up steam after stumbling out of the gate is that the rest of 2012 is relatively light on family films. Besides a 3D re-release of "Monsters Inc.," there is not much at the multiplex to appeal to parents with young children.
"There is the potential that this plays better as we get closer to the holidays," Wible said. "For whatever reason, people are not interested in seeing this film right now, and films tend to decay after their initial weekend of release, but this may have an atypical nature in terms of when people finally start going to it."
Unless "Rise of the Guardians" rehabilitates itself as a Christmas bauble families can't resist, however, DreamWorks Animation won't be left feeling all that thankful.