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**BettorsChat** · 10-28-2004, 10:12 AM

Would be nice to have some DWA with it being oversold 13x so it would be a nice easy profit.

**wallstreet** · 10-28-2004, 11:37 AM

BC,

I saw that IPO and I dont think it is going to do as well as PIXR, personally I think the product put out by Pixar is handsdown superior to DreamWorks.

And at this price..I will leave it for the mutual funds..

lol

But you are right, getting some of the IPO would be nice. That is another reason I tip my hat to GOOG..the underwriters made a flat rate, no over subscription and the company benefited..

**BettorsChat** · 11-05-2004, 10:06 AM

DreamWorks Draws a Crowd
By Rick Aristotle Munarriz (TMF Edible)
October 29, 2004

Slaying dragons and sharks has been kid's play for the company behind the popular Shrek and Shark Tale movies. Now DreamWorks Animation (NYSE: DWA) is slaying the market as well. After pricing its IPO at $28 a share -- well above the initial range that priced the deal between $23 and $25 a stub -- the company took off in a hurry yesterday. The shares opened at $39.50 and closed out their first publicly traded day at $38.75.

Raising $700 million will serve the company well as it has set up an aggressive release schedule to produce two animated feature films a year. But do investors know what they are getting themselves into at this point?

With just over 105 million shares outstanding, DreamWorks is valued as a $4.1 billion company. Rival Stock Advisor recommendation Pixar (Nasdaq: PIXR) is now a $4.6 billion studio. But just because the market caps are similar, that doesn't mean the pedigrees are.

Pixar has been consistently profitable, while DreamWorks Animation has posted losses during three of the past four years. While that can be dismissed as ancient history -- DreamWorks Animation is putting up great numbers this year and will continue to do so if the hits keep coming -- that's pretty much the point.

Pixar has an enviable track record, batting five for five at the box office with its computer-rendered features. DreamWorks Animation has a few duds like Sinbad and The Road to El Dorado in the tank. While the company's latest release has been impressive, tallying up nearly $140 million domestically over its first 27 days, that pales when compared to the $236.9 million that Pixar's last release -- Finding Nemo -- generated over the same number of days.

As the highest-grossing animated film of all time, Shrek 2 pulled in $356.2 million over that time frame. Great. Yet DreamWorks will need more bona-fide blockbusters, and Shark Tale was close but not quite there.

So where's the beef? Backing out the distribution fees that were booked as revenue and the distribution costs that were tacked on as expenses -- items which will now be tacked on to its parent's financials -- DreamWorks Animation earned $66.5 million on $181.5 million in revenue over the first half of the year. Pixar earned $64 million on $120 million in revenue over the same six months.

Similar market caps, similar profits? Well, yes, but Pixar still has to fork over 50% of its profits to Disney (NYSE: DIS). That will end with the company's first fully independent release in 2006. When you consider Pixar's net margins of 53% through those six months against DreamWorks' 37%, while both are incredible, it's hard not to like Pixar's chances.

Yet after catching the promising trailer for DreamWorks' next release -- next summer's Madagascar -- I was hoping DreamWorks would come to market with a more reasonable valuation. As a fan of Wallace & Gromit who is looking forward to DreamWorks Animation's first full-length feature next year, I was really hoping to discover DreamWorks Animation before the crowds came.

But, alas, it's too late. Pity.

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Market Melt-Up, Plus, Big IPO Tomorrow

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