Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why DreamWorks Shares Soared

By Jeremy Bowman - Updated Nov 17, 2016 at 4:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful? Or just another movement?

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 production studio DreamWorks Animation ( DWA ) were flying higher today, up as much as 11%, after Madagascar 3 led it to an especially profitable quarter.

So what: Revenue in the quarter increased 16%, to $186.3 million, while EPS jumped to $0.29, crushing estimates of $0.11. To date, Madagascar 3 has brought in nearly $720 million at the box office worldwide, making it the fifth highest-grossing film of the year. Puss in Boots also delivered about a quarter of the studio's revenue in the quarter. The success of Madagascar 3 also bodes well for the fourth quarter, where it will drive home video and international box office sales. CEO Jeffrey Katzenberg said The Rise of The Guardians, due out Nov. 21, should have a major impact on the bottom line, as well.

Now what: The success of Madagascar 3 is certainly a boon to shareholders but, due to the nature of the industry, this is essentially a one-time event. DreamWorks will continue to reap rewards in video sales, but the value of the stock will depend on future hits. Ultimately, this report should not affect your investing thesis. If you had confidence in DreamWorks before to deliver box office hits, this report should only serve to reassure you. If you see the company or industry as too risky, there's no reason this should change your mind.

Can't get enough of DreamWorks? Add the company to your Watchlist here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DreamWorks Animation SKG Inc. Stock Quote
DreamWorks Animation SKG Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.