Why DreamWorks Animation (DWA) Stock Is Gaining Today

NEW YORK (TheStreet) -- DreamWorks Animation (DWA) shares are up 4.4% to $23.80 after they were upgraded to "neutral" from "underweight" by analysts at Piper Jaffray  (PJC) with a price target of $22 on Monday.

The upgraded outlook comes despite the firm's lowered guidance for two of the production company's biggest movies this year, 'How To Train Your Dragon 2' and 'Penguins.'

The firm cut its forecast for both films down to $180 million from $200 million, but said, "While we are still trimming expectations for How to Train your Dragon 2 and the upcoming Penguins film, we think the worst of negative earnings revisions are behind us at this stage."

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TheStreet Ratings team rates DREAMWORKS ANIMATION INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate DREAMWORKS ANIMATION INC (DWA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.6%. Since the same quarter one year prior, revenues slightly increased by 9.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DWA's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The share price of DREAMWORKS ANIMATION INC has not done very well: it is down 7.95% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • Net operating cash flow has significantly decreased to -$12.49 million or 129.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: DWA Ratings Report
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