‘Shrek 4’: Wall St. Bets Low on the Ogre

Tracking is off from films 2 and 3; analysts prep for DreamWorks share-price shellacking

“The magic is gone,” noted one critic.

Wall Street put it another way: the share price is going down.

An analyst on Tuesday downgraded DreamWorks Animation stock, predicting a disappointing performance for the studio’s fourth “Shrek” installment, which premieres in 3D on Friday.

That sent DreamWorks share prices tumbling 6 percent – a fall that came less than two months after the disappointing opening of the studio’s 3D “How to Train Your Dragon” sent share prices cratering about 10 percent.

Going into the weekend, the over-under on the ogre still looks to be pretty huge – but not as big as the second and third “Shrek” installments, which opened to $108 million and $121.6 million respectively in the U.S. and Canada, and went on to respective worldwide grosses of $919.8 million and $799 million.

“If expected tracking is (compared) to ‘Shrek 2’ and ‘Shrek 3,’ then yes, it is definitely lower than expected,” noted a box-office tracking official, predicting the fourth installment will open to well under $100 million.

And in the eyes of Wall Street, that counts as underperformance.

Thomas Weisel analyst Benjamin Mogil predicts a domestic gross of about $315 million for “Shrek Forever After,” down from an original forecast of $375 million. He now estimates global ticket sales to be about $756 million, a drop from an original estimate of $900 million.

Weisel predicts a “Shrek Forever After” opening this weekend of between $75 million-$90 million.

Of course, this kind of opening would be spectacular for most movies, even those costing over $200 million and employing expensive 3D computer-animation techniques and copious celebrity voices.

But as was proven in late March by “How to Train Your Dragon” — which debuted to a lower-than-anticipated $43.7 million before gaining some serious box-office traction – it only takes one bad weekend for one movie to send DreamWorks shares tumbling.

And in terms of being a share-price influencer, “Dragon” is no “Shrek,” a cornerstone franchise for the studio, having grossed $2.2 billion in worldwide theater ticket sales alone since 2001.

For its part, officials for Paramount Pictures, DreamWorks’ distribution partner, believe premium 3D ticket prices will offset at least some of the “Shrek” franchise fatigue.

And unlike “How to Train Your Dragon,” which debuted into a market already cluttered several other 3D movies, “Shrek Forever After” will have the 3D exhibition market all to itself.

This might not be such a win-win for DreamWorks.

Last weekend, after eight weekends in North American theaters, “How to Train Your Dragon” was still very much a factor at the box office, driving another $5 million in ticket sales.

Getting “Shrek 4” launched wide will certainly negate the number of 3D venues “Dragon” plays in this weekend, putting further pressure on the fourth installment to perform.

As they were for the third installment, reviews for "Forever After" are mixed. However, critics seems to be expressing some fatigue with the franchise, with Entertainment Weekly’s Lisa Shwarzbaum noting, "Everyone involved fulfills his or her job requirements adequately. But the magic is gone, and ‘Shrek Forever After’ is no longer an orgre phenomenon to reckon with."

Still, with DreamWorks shares rebounding 1.2 percent to $35.31 per share Wednesday, not all Wall Street denizens are pessimistic, with the Motley Fool’s Rick Aristotle Munarriz nothing that the company has beaten analyst profit estimates in 17 of the last 18 quarters.

“It’s hard to bet against DreamWorks Animation,” he wrote.