Wall Street has mixed reviews for the early buzz on Jerry Seinfeld's Bee Movie. Shares of DreamWorks Animation ( DWA) drifted down 1.9% on Monday, even though Bee Movie, its latest film, led the box-office results in North America for its second weekend in theaters. The movie, created by Seinfeld, had a three-day haul of $26 million, down from its debut weekend, which brought in $39.1 million. Still, it rebounded against Universal Pictures' American Gangster, which slid from No. 1 to No. 2. That made Bee Movie the first film to rise in the rankings to hit No. 1 after its debut week since Wedding Crashers in July 2005. Sanders Morris Harris analyst David Miller calls the performance "outstanding" for a second weekend, noting that box-office receipts for animation films normally decline 38% to 42% in their second weekend, while Bee Movie was down only 32%. "That implies strong word-of-mouth and repeat viewings," says Miller, who holds a buy rating on DreamWorks. "These are not Shrek-type numbers by any means, but so far they're trending in line with our numbers, and we don't understand why the stock is down today." After this year's third installment of Shrek, DreamWorks' smash-hit franchise, the success of its collaboration with Seinfeld, the comic legend, was viewed by investors as a key to ensuring ongoing momentum for its stock price. The stock is up 2.2% so far in 2007, closing Monday at $29.93.
Miller told TheStreet.com in May that Bee Movie would have to do at least $250 million in box-office revenue worldwide in order to keep shares of DreamWorks trading over the $30 mark. Now, he expects the movie to bring in $320 million worldwide and $170 million domestically, but not everyone agrees. In a note to clients on Monday, Cowen & Co. analyst Doug Creutz called the movie's performance "somewhat disappointing" so far, "despite a ubiquitous marketing campaign" from Seinfeld, who also stars in the movie as the voice of its winged protagonist, Barry B. Benson. The movie "has continued to underperform at the box office and we now expect the film to earn $130 million in ultimate domestic box office, down from $166 million," said Creutz. "As a result, we do not expect the film to contribute meaningful profits to DreamWorks Animation during its lifetime." As a result, Creutz reduced his 2007 revenue estimate for the company to $782.9 million from $783.4 million. He also lowered his 2007 earnings per share estimate to $2.18 from $2.19. Analysts, on average, are expecting DreamWorks to post earnings for the year of $2.19 a share on revenue of $800.1 million. Meanwhile, Creutz made more dramatic cuts to his 2008 outlook. Next year, he expects the company to report $591 million in revenue and $1.11 a share in earnings. Previously, he was expecting 2008 revenue of $667.3 million and earnings of $1.47 a share. Analysts' average estimates call for revenue of $727.3 million and earnings of $1.76 a share next year. Creutz's negative outlook comes at a time when the stock market is buckling under concerns about consumer spending and economic growth amid the downturn of the U.S. housing market. He holds a neutral rating on the stock, noting headwinds for the company such as increased competition in animated movies, a mixed track record on the quality of its releases and a lack of long-term growth catalysts. "Based on our long-term view, we believe the shares are unlikely to outperform the market over the next 12 months," said Creutz.