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.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation and Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.