DreamWorks Animation SKG, Inc. (DWA)

Following MVL's footsteps somewhat and entertainment is needed in tough economies to help us make it through the tough times.

one of the best movie animation

This account tracks the fast-growing shakers and movers and some of the riskier stocks on my watch list.

Last man standing. (so to speak) Last Intellectual property company...Disney just bought Marvel. Warner Bros, I think DWA is calling your name...don't let someone else acquire DWA before you do...DWA in the meantime is successful and solid so even if no one comes to the consummation table, the company will continue to grow and compete well.

Increasing demand for 3D movies, which have higher ticket prices and more profit, will keep this stock trending higher. Shrek 4 release next year will produce huge profits. Technical analysis long term is very bullish.

This motion picture company is going to be releasing more movies per year than it's original history starting next year(2010).

Great character-based movies that branch out into dvds, toys, games, & other revenue-producing streams will carry this stock & this company for the next several years. Mid-cap-sized company w/room to grow, much like Marvel & Pixar before Disney acquired them. DWA is attractively priced and now is the time to buy since MVL is going to be swallowed up by DIS. It's a better play for the growth-oriented investor - buy DWA now!

Q1 2010 Target Price: $38

Although I am perplexed by its uneven earnings history, I think Dreamworks Animation is a great company with a leading niche in a growth industry. The longterm future should be bright at the current entry price seems reasonable at 15 times trailing earnings and 2.45 times book value. The Stockscouter rating for this company is 10. This gives me confidence that the timing is right.

Great slate of movies an characters that will keep the revenues coming in for years to come.

I wrote a blog entry about why I love Dreamworks:
Dreamworks' core business is movies, specifically computer animated movies. Most of these movies are extremely profitable (Kung Fu Panda grossed $635 million on a $130 million budget) and the ones that weren't at least made some profit (Flushed Away grossed $175 million on a $149 million budget). Based on Dreamworks' future lineup, they seem committed to both cashing in on past successes (Shrek, Madagascar and Kung Fu Panda sequels) as well as attempting new ideas. So far they have 3 fantastic series that act as cash cows which gives them plenty of wiggle room to develop new IPs.

Now Pixar (Dreamworks' main competition) tends to have the better rated movies, but stock investing isn't about getting the best reviews, it's about making money. Dreamworks movies make just as much if not more money than Pixar movies. Pixar also has nothing lined up for the next two years other than sequels, they're making less effort in developing new ideas. Also, Pixar is owned by Disney so you invest in Pixar alone (other I would have), only the giant saturated Disney.

Dreamworks also has been looking into alternative sources of income, they're licensing their characters much like Marvel. They now make money off toys, broadway shows, t.v. shows, and video games (though video game movies tend to be awful, kids are less picky about what they want). This provides both a nice place for growth and a nice cushion in the event of a flop.

Any analysis would not be complete without checking the fundamentals. Dreamworks has almost 4 times as much equity as liabilties, almost no long term debt, and plenty of cash. The p/e is currently at 16, which in my opinion is low compared to the expected growth of Dreamworks. At a rate of 2 movies a year (1 cash cow and 1 new IP) and the possibility of new profitable series like Shrek, I think Dreamworks' growth is going to be pretty amazing.

Kids will now and forever eat up their products. Very solid movie base anchored by the Shrek franchise that can be milked for video games, TV shows and sorts of additial revenue.

With Shrek and Madagascar sequels due out in the next 2 years, I dont see any signs of a drop off.

Good writers and animators will lay the ground work for future animated blockbusters as well.

Moving up

They are quickly building a name for themselves, have recently decided to produce films 25% more often than they have been in the past, and have a distribution deal which expires at the end of 2012 which can potentially be replaced by something more favourable.

They have managed to turn movies into brands with promotions and continue to develop these brands with sequels, tv specials and merchandising.

With such a low market cap and all of the promoting they do, one major blockbuster can potentially create earnings equal to 10% of the company value. If they can, over time, become half the company Disney has, this is an 8-bagger.

ingenuity

Touted as a potential 10-bagger by the Fools - plenty good enough for me....

This company has guiding principles that make it a leader in the industry.

Looking at their balance sheet I see a relatively low debt amounts and I believe they are some of the best in their business

Animated films and movies are in demand with people staying home. Good spec sheet, buy.