Ahead Of The Bell: DreamWorks Upgraded

NEW YORK (AP) — William Blair & Co. upgraded shares of DreamWorks Animation SKG Inc. on Monday, offering an upbeat take on the studio's slate of films and the chances for a takeover bid.

William Blair analyst Ralph Schackart lifted his rating to "Outperform" from "Market Perform," telling investors in a note that "business trends appear to be solid."

Schackart expressed confidence in the studio's upcoming releases after an investor meeting last week with CEO Jeffrey Katzenberg.

"While we admit we cannot predict ultimate consumer reception, we came away from the preview impressed with DreamWorks' upcoming content," he said, singling out "Shrek Forever After," the fourth in the Shrek franchise.

Schackart also pointed to the company's aggressive push into 3-D films. DreamWorks has decided to release all of its new titles in the new format, which Schackart said boosts development costs by 10 percent but has the potential to grow box office gross returns by 30 percent as more 3-D screens become available.

Finally, The Walt Disney Co.'s $4 billion bid for Marvel Entertainment Inc., with its catalog of superhero characters, "puts a floor on DreamWorks Animation shares," Schackart said.

He estimates that based on what Disney is willing to pay for Marvel, a bid for DreamWorks could amount to roughly $50 per share. The company's stock closed down 13 cents to $35.29 on Friday.