DreamWorks Animation (NYSE: DWA) received a nice gift from Goldman Sachs (NYSE: GS) today. The cartoon studio has been put on the institution's famous Americas Conviction Buy list, according to an article out on Reuters.
Goldman Sachs believes that the company should see a lot of prosperity in the next six months. The stock might even rise as high as $45 per share, if the price target is to be believed. The premium attached to 3-D movie tickets is part of the thesis here. As well as something else, something a lot more powerful: the franchise value of Shrek.
As we all know, the fourth Shrek feature is due to be released in summer 2010. The project will be distributed by Viacom (NYSE: VIA), which has had success delivering other animated exercises generated by DreamWorks Animation to the multiplex market.
I have no doubt that the next Shrek will do strong business. And I'm sure the stock will rise as we get closer to the release date. Well, saying I'm sure the stock will go up shouldn't be taken too strictly. Obviously, I can't predict the future.
I'm sure you know what I mean, though. As with any trading vehicle, you look for catalysts. In this case, DreamWorks Animation has built up a character that has become similar in terms of brand equity to Marvel's (NYSE: MVL) Spider-Man. Celluloid consumers are pretty much programmed at this point to go out and see Shrek when it hits the multiplex. The impulse is now firmly embedded in the cultural DNA.
I don't know if $45 will be reached or not, but somewhere over $40 is probably a given. At the time of this writing, shares of DreamWorks Animation could be had for $35.31. If you're thinking of getting in on the company, I believe it would be better to wait for a pullback. I do see the merit of this upgrade, and find the stock a good candidate for further examination.
Disclosure: I don't own any company mentioned; positions can change without notice.
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