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November 10, 2008
Dreaming of Gains. Again.
The weak action yesterday in Dreamworks Animation (DWA) following the better than expected opening of Madagascar 2: Escape 2 Africa led me to buy DWA shares again for a trade. I am looking to for a move north of $30 assuming the film continues to track toward greater than $200 million domestically. The prior trade in DWA culminated with a very small loss when the shares were sold last summer just over $30.
The next catalyst for the shares will be second weekend box office. The two most comparable films are Madagascar and Kung Fu Panda. Madagascar 2 opened at $63 million, ahead of $60 million for Panda and $47 million for Madagascar. Panda and Madagascar opened on 6/8/08 and 5/29/05, respectively, so the summer run is not necessarily comparable as kids were out of school. As a result, it would be bullish for DWA shares if Madagascar 2 holds better than the other two films which fell by 40-44% in their second weekend.
Besides potential upside other positives exist for DWA. First, I'd expect analysts to reiterate buy recommendations after the big opening weekend followed by a decline in the shares. Second, the Panda DVD hit stores yesterday. Third, Shrek the Musical is opening on Broadway. If each of these items works positively the shares should respond especially flowing better than expected 3Q08 results announced at then end of October.
One last point is that DWA is a media stock with ZERO exposure to advertising. This makes it a good place for dedicated media investors to hide.
Posted by Steve Birenberg at November 10, 2008 02:07 PM in DWA
1.THE GOOD NEWS WAS BOTH THE OVERALL MARKET AND THE EEM BOTH HAD VERY LARGE GAINS TODAY.
THE BAD NEWS IS THAT CETV AND MICC BOTH HARDLY PARTICIPATED IN THESE RALLIES AND STILL ARE AT VERY LOW PRICE LEVELS.WHY DO GOOD COMPANIES LIKE CETV AND MICC NOT MOVE WITH THE MARKET IF THE RATIONAL FOR THEIR DROP IS RELATED TO MACRO FORCES AND NOT TO THEIR INDIVIDUAL PROBLEMS.
As I have said before it takes time for broken stocks to regain their luster. Money managers are not going to rush in to buy stocks that have not rallied on previous big bounces. Stocks like CETV and MICC will be more like stretched rubber bands and will gain quickly when the market really believes the bottom is in based on improvement in fundamentals. You are going to have to be patient with these two but if you beleive as I do that the long-term value is there, the reward is going to be enormous, especially for CETV.
Posted by: Steve at November 13, 2008 06:16 PM