NEW YORK (TheStreet) -- Shares of DreamWorks Animation Inc. (DWA) are up 25.22% to $28 in pre-market trade after it was reported that the studio is in talks to sell the company to Japanese telecommunications firm SoftBank Corp., (SFTBF) , sources told the Los Angeles Times.
Jeffrey Katzenberg, CEO of the studio, has been in discussions to sell the company he launched 20 years ago to SoftBank, which owns Sprint Corp. (S) and recently dropped a bid to acquire T-Mobile (TMUS) .
The DreamWorks board held a meeting Thursday to consider an offer by SoftBank to buy DreamWorks for $32 a share, well above the company's current share price, which closed at $22.36 on Friday, sources said, according to the Times.
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. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DWA's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The revenue fell significantly faster than the industry average of 8.1%. Since the same quarter one year prior, revenues fell by 42.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DREAMWORKS ANIMATION INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DREAMWORKS ANIMATION INC turned its bottom line around by earning $0.65 versus -$0.43 in the prior year. For the next year, the market is expecting a contraction of 112.3% in earnings (-$0.08 versus $0.65).
- The gross profit margin for DREAMWORKS ANIMATION INC is currently lower than what is desirable, coming in at 28.41%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -12.58% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$53.95 million or 145.37% 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