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February 08, 2009
Both Dreamworks in the News
Dreamworks is in the news. First, Dreamworks SKG, the privately held, live action movie studio that is home to Steven Spielberg, is changing plans and will use Disney (DIS) as a distribution partner as opposed to Universal Pictures (owned by GE). Second, Dreamworks Animation (DWA), the publicly held animation company, was the subject of a lengthy positive article in the New York Times.
To clear up any confusion, SKG and DWA are completely independent with the exception of overlapping shareholders (Spielberg, David Geffen, and Jeffrey Katzenberg). The news stories about SKG have absolutely no impact on DWA.
The SKG news does matter to DIS, however. I think it could be a modest positive. DIS has sharply reduced its own productions to its core family franchise, both animated and live action. The SKG deal gives DIS another 5-6 adult films per year to distribute and brings the prestige of having Spielberg as a partner. Reports indicate DIS may invest up to $400 million in SKG which should be recouped profitably through the distribution fee (8-10% of box office). Usually these deals give the distributor payment off the top, directly from gross box office receipts, generally producing a modest but consistent profit stream. DIS is strong financially despite its cyclical and secular challenges so the company is in a position to invest while other studios (NWSA/FOX, Warners/TWX, Paramount/VIA, Sony, Universal/NBC) have parent companies who need to preserve cash. On last week's conference call, CEO Bob Iger indicated DIS would its financial strength to invest and build the company for the long-term. SKG is not a huge deal but I think it is a good example of what Iger was referring to.
As for the article about DWA, I think it provides a balanced view that leans positive and supports my thesis that DWA is uniquely positioned among major media companies as insulated from the some, but not all, of the cyclical pressures currently buffeting the industry.
DWA reports on 2/24. Estimates have dropped sharply due to weak DVD sales at Christmas but I think the lagging performance of the stock reflects this fact. Slowing sales of tickets for Shrek The Musical on Broadway have also contributed to the lagging share performance. I think the earnings report and call will clear the stage for a rally into the March 27th release of Monsters vs. Aliens. Insider buzz on the film is good and the stock has rallied into movie releases in the past. I think DWA is a good long side trade in the current market environment.
Posted by Steve Birenberg at February 8, 2009 02:07 PM in DWA
1.micc had an excellent earnings report and spiked accordingly. what do you think the fair value of this stock is presently?
2.any predictions about the upcoming cetv conference call?
If the market were to go up, MICC has good upside, maybe into the $60s. The solid quarter and guidance clears the air for the time being. Biz is holding up better than I would have thought.
I have limited info on the CETV call. I expect to hear a lot about cost cutting and little about revenue forecasts. I would not expect more than a rough outline of 2009 guidance. If the company can convince investors that 2009 will be no worse than recent estimates form Goldman et all, the stock could pop in a relief rally but with the economic outlook still troubled and weakening in most of their markets it is hard to be optimistic. Ongoing weakness in emerging market currencies is also hurting the stock.
Posted by: Steve at February 15, 2009 11:55 AMTHE MARKET JUST GAVE ANOTHER DOW SELL SIGN.WE LOOK TO BE GOING INTO ANOTHER DOWN LEG.CBS,ANOTHER MEDIA STOCK,SHOWED POOR EARNINGS AND GOT BLASTED . CETV JUST DROPPED INTO THE $6'S.CETV IS OBVIOUSLY A BROKEN STOCK. CAN IT MOUNT A SERIOUS COMEBACK ANYTIME SOON ?IS THERE ANY REASON TO HOLD ON TO THE STOCK FOR NOW?
Posted by: MP at February 19, 2009 11:19 AMThe market needs a sign the economy is stabilizing. Right now there are no positive signals and the fresh stats all signal that things are getting worse.
CBS stck is up despite a losuy report and dividend cut. For CETV, the hope is that everyone is now expecting awful numbers and commentary so the stock will bottom once the news is announced. As long as confidence in Central and Eastern Europe economies is low the stock will have difficulty recovering. If you feel the news is going to get even worse from the region you should sell. Once the news stabilizes adn a little confidence returns the stock will soar. The question is how long yu will have to wait. Right now, it seems like you will have to wait a bit. The big issue is if you sell at $7 will you buy back at $10or $12 or $15.
Posted by: Steve at February 19, 2009 12:04 PM