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DreamWorks (DWA) Home Sees Grand Opening, Stock Soars - Analyst Blog

DreamWorks Animation SKG Inc.’s DWA new release, Home, garnered nearly $54 million in the U.S. in the opening weekend, exceeding analysts’ expectation. Also, released across 3,708 domestic theaters last weekend, the film is the highest-grossing movie of the week.

DreamWorks’ revenues are highly dependent on the Feature Film segment which accounts for nearly 75% of the total revenue. Thus, the latest feature success has resulted in a 6.57% increase in the company’s share price during yesterday’s trading session. At the close of market, the company’s share price was pegged at $24.17, marking the highest since Nov 14, 2014.

Home has collected as much as almost $99 million worldwide in the opening weekend while $135 million was spent in making the movie. Notably, the company has seen such a compelling box-office performance by any non-sequel movie for the first time. Moreover, this release marked the highest box-office collection for the company after a span of three years.

Of late, DreamWorks has been witnessing considerable softness in its movie business. Except for How to Train your Dragon 2 – which has been nominated for the Oscars as well –  movies like Penguins of Madagascar and Mr. Peabody and Sherman generated revenues well below expectations. Furthermore, the company incurred impairment charges for both the movies.

Owing to the inherent volatility of the movie business, DreamWorks is striving to expand beyond its movie and home video business. Recently, the company struck a multi-year deal concerning original online programming with Verizon Communication Inc. VZ. Following this development, Verizon will offer its online video customers a 200-hour package of live family entertainment created by DreamWorks and its AwesomenessTV (ATV) unit.

The company recently launched its online TV channel – DreamWorksTV – on Google Inc.’s GOOG YouTube. This multi-platform media service will combine DreamWorks’ original content library with the digital expertise of AwesomenessTV, which was acquired by the company in May 2013.

DreamWorks is also focusing on producing original animated TV series for children and has also struck an online streaming agreement with Netflix, Inc. NFLX.

Last year, animated movies have performed considerably well at the box office. Hit flicks like Hero 6, How to Train your Dragon 2 and Rio 2 have amalgamated $632.8 million, $618.9 million and $500.2 million, respectively. However, lack of film releases this year is a bit of a concern for the company.

DreamWorks currently has a Zacks Rank #3 (Hold).


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