Shares in the company are up more than 8% as markets open, kicking off the day trading at $24.30. That’s the highest level they have reached since November. It’s a welcome change for DreamWorks Animation, which has seen its stock slide precipitously since last spring, weighed down by a series of film flops, writedowns, failed sales to Hasbro and Softbank, plus layoffs.
But “Home” briefly swept those troubles aside when it debuted to $54 million, roughly $20 million more than most analysts had predicted it would generate.
“It’s a huge morale boost both for investors and employees at the company,” said Tony Wible, an analyst with Janney Capital Markets. “The film business is what’s been languishing there, and these results mean they avoid another impairment and have found a possible other franchise.”
Indeed, “Home” is the third biggest non-sequel opening in DreamWorks Animation’s history, behind only “Kung Fu Panda” ($60.2 million) and “Monsters vs. Aliens” ($59.3 million). It represents the studio’s best chance for a new franchise in years — something it desperately needs now that “Shrek” has run out of gas and “How to Train Your Dragon” and “Kung Fu Panda” are entering their third installments.
Moreover, for the first time in over a year, DreamWorks Animation was able to leverage a starry cast that included Rihanna, Steve Martin and Jennifer Lopez to peresuade a diverse audience to show up. That demonstrates there’s still strength in its old model of matching A-list talent with animated fare, provided DreamWorks Animation shakes up the formula to appeal to a broader portion of the moviegoing public.
“If it follows the trajectory of previous DreamWorks films, this is going to be profitable,” said Marla Backer, an analyst with Research Associates. “A lot of investors had written DreamWorks off in the near term and this opening may make them think twice.”
That’s not to say that “Home’s” strong debut obviates the company’s very real issues. DreamWorks Animation still needs to better control costs (“Home’s” budget was a sizable $130 million), and the studio is facing intense competition in the animation space from the likes of Blue Sky, Disney and Illumination. Plus, it’s hard to be a publicly traded, mid-size entertainment company jockeying for attention and profits alongside sprawling media conglomerates.
To that end, DreamWorks Animation is overhauling its feature film unit by bringing in producers Mireille Soria and Bonnie Arnold to head the division and reinvigorate its slate of films. The studio won’t release another picture until “Kung Fu Panda 3” debuts in March 2016, so this could be the last stock bump the company enjoys for awhile, analysts caution.
“They’re not remotely done with restructuring,” Wible said. “Their next film doesn’t come out for a year, so investors looking for growth should look elsewhere.”