DreamWorks Stock Slips After Goldman Sachs Downgrade

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DreamWorks Animation’s stock troubles continued this week as Goldman Sachs downgraded the company’s stock to sell based on weak ticket sales for Puss in Boots and soft DVD and Blu-ray sales for Kung Fu Panda 2.

The stock has rebounded from a low point of $16.50 in late December, and closed Thursday at $17.89. Still, the stock is down significantly in the past year and prospects for a change are uncertain.

Goldman Sachs analyst Drew Borst reported sales of Kung Fu Panda 2 were well below expectations at 4.5 million units worldwide in the fourth quarter. Borst set a target price for the company’s stock at $15. He also said the domestic gross for Puss in Boots‘ first 10 weeks of release was 15 percent below Goldman’s estimate of $180 million at about $147 million.

One of the burning questions facing the company is who will distribute DreamWorks Animation’s films after its current deal with Paramount expires at the end of the year. Many watchers expect the studio, headed by Jeffrey Katzenberg, will either try to raise capital to fund its own distribution, or will pay another studio to handle it at a rate higher than what it was paying Paramount.

Additionally, there is greater competition in the children’s and animation markets from other studios ramping up production in the medium as well as from non-movie entertainment options such as videogames, the internet and television.

DreamWorks Animation plans two releases in 2012: Madagascar 3: Europe’s Most Wanted on June 8, and Rise of the Guardians on Nov. 21.