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Here's a simple plotline for you. A high-powered animation studio has a huge hit on the way, and investors drive its stock higher. The movie does great box-office business, as predicted. But with no repeat in sight, investors get bored and sell, pushing the stock back down to where it started.
OK, it's not a gripping tale, but it's the story line Wall Street expects from DreamWorks Animation (DWA, news, msgs) as it prepares to release "Shrek the Third" on May 18.
Investors have seen this plot develop before. It's the same one followed for years by Pixar before it got taken over by Walt Disney (DIS, news, msgs) last year. Pixar's stock typically advanced until the eve of a big movie release. Then it languished until buzz about the next movie lifted the stock.
But here's why I think this is an entirely different movie: Comedian Jerry Seinfeld is about to step in with a surprising plot twist.
Yadda, yadda, yadda
While Pixar's ups and downs were understandable because roughly 18 months elapsed between hits, Seinfeld's collaboration with DreamWorks, called "Bee Movie," is just around the corner. It's due out in early November, not long after "Shrek" hoopla dies down.And unlike other recent animated DreamWorks productions, Seinfeld's first shot at animation should be a big hit. "Seinfeld has been devoting the past three or four years of his creative life to developing 'Bee Movie,' and that's kind of gotten lost in the shuffle because everyone is focusing on 'Shrek,' " says Chris Scheuer, an analyst with Thrivent Financial for Lutherans, which holds a position in DreamWorks.
Goldman Sachs (GS, news, msgs) analyst Anthony Noto believes "Bee Movie" will gross $440 million at the box office -- partly because Seinfeld will reach beyond parents bringing their children.
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That take wouldn't vault "Bee Movie" into the top tier of computer animation movies like "Finding Nemo," which grossed more than a billion dollars at the box office. But it would make it a respectable hit on the level of "Cars" and put it well above the average take for an animated film over the past decade, which was $258 million, according to Prudential Equity Group.
"Bee Movie" may also signal the start of a good two-year run of hits for DreamWorks at the box office -- a big reason why Goldman Sachs recently added DreamWorks to its "buy" list with a 12-month price target of $36, a 20% gain from here.
One reason for this likely turnaround is that DreamWorks just cut its ties with Aardman Animations, a partnership that has been a drag on growth since it produced several box-office flops, says Thrivent's Scheuer. (The most recently example: "Flushed Away," which produced a disappointing gross of just $167 million.)
With more than $500 million in cash, DreamWorks also now has the financial strength -- not to mention the talent -- to get back to its original game plan of producing one new movie and one sequel a year on its own, Chief Executive Jeffrey Katzenberg said in a recent conference call. "Over the next two years, I believe that our films are not only different from each other but also different from anything else in the marketplace," says Katzenberg.
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'Bee Movie' trailerJerry Seinfeld voices a bee who sues humanity for cruel honey consumption in DreamWorks' upcoming animated feature "Bee Movie."
- A sequel to the 2005 hit "Madagascar" is to come out in November 2008. Featuring the voices of Ben Stiller and Chris Rock, the movie could book $522 million at the box office, predicts Noto at Goldman Sachs. The original brought in an impressive $722 million, so Noto's forecast isn't far-fetched.
- "Kung Fu Panda" is slated to feature the voices of Jackie Chan, Dustin Hoffman and Lucy Liu. The movie may get extra buzz because of Chan's role in promoting the Olympics in China, which will begin a few months after the film's scheduled June release. This film could take in $550 million at the box office, Noto says.
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