Even $71 million didn’t cut it for some Pixar investors, as the CGI animation studio saw its shares decline 6% Monday after the opening of “The Incredibles.”
Analysts said investors might have been hoping for an even bigger opening, especially based on strong reviews last week that led to a 5% spike in Pixar shares Friday (Daily Variety, Oct. 8).
“We believe this is somewhat short of Street expectations for an $80 million-plus opening,” JPMorgan analysts Spencer Wang and John Blackledge said in a research note.
In other words, what’s good news in Hollywood was disappointing to some on Wall Street, who had already priced Pixar shares up on the expectations of an opening higher than $70 million.
Wall Streeters also noted, however, that Pixar shares have traditionally fallen following the opening of their movies. That trend continued for three of its last four theatrical releases.
In most cases, the drop follows a big rise in Pixar shares in the months building up to a new pic. “The Incredibles” has followed that pattern, with Pixar shares up 25% in the past three months.
“I think the results were in line with what most analysts expected,” commented Vintage Research analyst Alden Mahabir. “I think this is a classic case of selling on good news.”
According to this interpretation, investors were pleased with B.O. for “The Incredibles” but think the company won’t do much better with that success built into the price and decided to sell at what they perceive to be the high.
All eggs in one basket
Either way, the drop illustrates the volatile nature of stocks in the much hyped CGI space. It also demonstrates how a company like Pixar, which relies on one feature release per year to drive nearly all its earnings, can rise and fall based on the smallest shift in perceptions of that pic.
Pixar competitors DreamWorks Animation had a smaller but still significant drop Monday as well, closing down 4% at $38.90. Pixar is now valued at $4.48 billion, less than a half billion more than DreamWorks Animation, which closed at $4.11 billion before news of the boffo homevideo performance of “Shrek 2” broke.
Pixar stock closed Monday at $79.25.