UPDATE: Morgan Stanley Upgrades DreamWorks On Better Film Outlook & Diversification
In a report published Monday, Morgan Stanley analyst Ryan Fiftal upgraded DreamWorks Animation SKG (NASDAQ: DWA) from Underweight to Equal-weight on better film outlook and diversification. The analyst lowered the price target to $26.00.
Fiftal noted that the release of How to Train Your Dragon 2 in June will end the two-year stretch without a sequel. The analyst expects “steadier” earnings with sequels making up half of the earnings through YE16.
Morgan Stanley wrote, “Furthermore, we believe DWA will be more selective with release dates, which could lower run-rate output but likely would increase average film profits and reduce risk (e.g. Kung Fu Panda 3, currently set to follow Star Wars Episode VII, we believe is a rescheduling candidate).”
The analyst expects How to Train Your Dragon 2 to hit $690 million in global box office sales versus consensus estimates of the low $600s. Fiftal additionally sees value in diversification outside of theatrical, including consumer products and TV.
Shares of DreamWorks Animation closed at $24.14 on Monday, and are currently up 1.284 percent at $24.45.
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