Why DreamWorks Animation (DWA) Stock Is Sinking Today

NEW YORK (TheStreet) -- Shares of DreamWorks Animation (DWA) are sinking 3.23% to $27.27 in morning trading, continuing the tumble from yesterday's after-hours trading following a report by The Wall Street Journal that talks have slowed with Japanese Internet company Softbank (SFTBF) .

Negotiations could restart for a deal instead of an outright takeover, possibly for a content partnership, noted the Journal.

Softbank, which owns 32% of Alibaba Group Holding (BABA) , is in a position to acquire other firms with its recent influx of funds from the Alibaba IPO.

Separately, 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

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