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Why Shares of DreamWorks Animation Skg Inc Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of DreamWorks Animation Skg Inc  (NASDAQ: DWA  ) were waking up from a nightmare today, falling as much as 15% after a disappointing earnings report.

So what: The animation studio said revenue fell 22.8% to $204.3 million as DVD sales of its most recent release, Turbo, were slower than expected. Analysts had expected revenue of $223.2 million, but the company still beat earnings estimates by a penny with adjusted profits of $0.32 in spite of the revenue miss. CEO Jeffrey Katzenberg looked forward to 2014, saying the company has "three great feature releases lined up," including Mr. Peabody & Sherman, How to Train Your Dragon 2, and Home, and that it will continue to invest in its television, consumer products, and digital and location-based entertainment businesses.

Now what: Movie studios are notoriously risky businesses and are often only as valuable as their latest release. DreamWorks is a respected brand within the industry and has turned out a number of hits. A new agreement with Netflix also presents another revenue stream for DreamWorks, but it won't release another movie on the streaming service until the fourth quarter. Risk-seeking investors may want to take a gamble on DreamWorks, but generally, I avoid stocks with such unpredictable revenue streams.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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9/3/2015 3:59 PM
DWA $21.03 Up +0.88 +4.37%
DreamWorks Animati… CAPS Rating: ****