DreamWorks Animation (DWA) has been hurting lately. For a studio that only releases 1-2 films per year, each release is key and is more or less their tentpole for the year. And when one of the releases, such as 2012′s Rise of the Guardians, underperforms, it takes a big chunk out of DreamWorks profits and price. As a result, DreamWorks has had to take to rescheduling a future release to 2014 (Mr. Peabody and Sherman). On the positive side though, the company reached a content distribution deal with Netflix (who is becoming their own content producing company now), to have a spin-off of this year’s Turbo available on Netflix exclusively. This helps bolster additional revenue outside of the primary film release schedule for DWA. The strategy can only be helped with a positive Turbo review/performance. Moreover, DreamWorks Animation seems to be ramping up its theme-park licensing efforts. Its signed up to license its characters to multiple parks in Russia (huh?) due on or after 2015. There’s current incarnations of DWA characters in various parks in the US (such as Shrek), but it seems DreamWorks is trying to license even more of their established franchises to offset the volatility that comes with each film release.
At the moment, the stock is languishing near its 52 week lows, and has been stuck in a rage from $16-$18 for much of the past 2 years, minus a recent bump to $20. In it’s current state, the market likes to give DWA strong support below the $16.50 level but theres been some trouble going above $17 as well for a tight range. With Friday’s close the stock recently broke a 3.5 month downtrend, though it should be noted it is possible to see a pullback towards the trendline, especially with their new release, the Croods, coming out in early March (earnings are on the 26th also). These 2 events should play as a catalyst for the next few months and whether the stock sits around $16, or worse breaks that important support line, or goes higher, back towards the $19.5 level where recent support and resistance happened, while closing a gap along the way. If anything, RSI has shown some improvement making a higher low while the stock was not necessarily doing much, just consolidating. It will be important for the momentum indicator to stay above the 45-50 level for DWA to make any headway towards the 52 week highs of $22. It’s also important for their events to come out positively in order to maintain pace with Disney, whose price and trend can be seen at the bottom of the chart as well – a pure uptrend.