After sharp sell-off earlier this week, Dreamworks Animation shares reversed hard yesterday and are up again today even as the market trades to its daily lows. I got long DWA recently because of my confidence that (1) Madagascar 2 will exceed analyst estimates for domestic box office, and (2) Kung Fu Panda DVD sales will be solid. Following a positive surprise in 3Q results this would maintain the positive sentiment and set up 4Q08 and 1Q09 for more positive surprises.
We won’t know for sure about Madagascar 2 until we see how well the film holds this weekend but the opening weekend was excellent and an unprecedented surge on Veteran’s Day’s suggests interest in the film is high. Did the Veteran’s Day steal the weekend sales? We will know soon enough. A dorp of less than 40-45% for the weekend is good news.
DVD sales Panda just started this week so there is no hard data but anecdotal evidence is promising. See here and here.
DWA is a media stock with no advertising exposure. It had held up well relative to the group. There are catalysts and the earnings outlook has minimal risk. I think it has upside of 15-20% if the market stabilizes and moves up from here.