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: DreamWorks Animation SKG Inc (DWA) shares were taking a hit today, dropping as much as 13% and finishing down 11% after its new theatrical release How to Train Your Dragon 2 disappointed at the box office.
So what: In its debut weekend, How to Train Your Dragon 2 brought in $49 million, but that was the less than the $65 million analysts had expected. The sum also placed it below 22 Jump Street in the weekend's box office rankings, which made $57 million. The original How to Train Your Dragon had made $43 million in its first weekend, and other DreamWorks sequels had made $60 million or more in their opening weekends, so expectations were high for the sequel, which has won acclaim from critics.
Now what: The movie cost DreamWorks $145 million to make, so the animation studio will have to count on a strong international performance for it to return a profit. With only one more theatrical release scheduled for this year, The Penguins of Madagascar, the performance of Dragon 2 was especially important, as the studio has struggled lately -- with DreamWorks shares tumbling earlier this year after it badly missed earnings estimates in its first quarter. The stock is now near 52-week lows, and considering the volatility in the movie industry, now could be a great time to pick up shares of an otherwise strong brand.
