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DreamWorks Animation shares tumble after ‘Shrek’ film debut

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Shares of DreamWorks Animation took another drubbing Monday after a less-than-monstrous debut for ‘Shrek Forever After.’

DreamWorks shares dropped 10% to $31.31 in early morning trading after the Glendale studio reported far lower box office numbers for the final ‘Shrek’ film than investors had anticipated.

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The fourth movie in the series generated an estimated $71.3 million in revenue in the U.S. and Canada this weekend, compared with $121.6 million for ‘Shrek the Third’ in 2007. What’s more, the number of people who watched the film was more than 50% less than for ‘Shrek the Third,’ when taking into account ticket price inflation and 3-D surcharges.

[Update, 1:16 p.m.: The actual weekend gross for ‘Shrek Forever After’ once Sunday ticket sales were fully calculated was $70.8 million.]

Although the film will probably still be profitable, the results stunned Wall Street analysts who had been banking on a much bigger opening. They cited several possible explanations, including audience fatigue, higher-priced 3-D tickets and a weariness with the ‘Shrek’ characters.

‘It’s a tired franchise, and they went back to the well too many times,’’ said James Marsh, an analyst with Piper Jaffray & Co,. who lowered his price target on the company’s stock to $33 from $38 and expects the film will generate $200 million domestically, compared with $325 million for ‘Shrek the Third.’ Wedbush Morgan Securities analyst Michael Pachter, who had projected the movie would bring in $120 million on its opening weekend, called it ‘somewhat disappointing given DreamWorks’ ability to secure a large number of 3-D equipped theaters.’ The film, which had a budget of about $165 million, was shown in 2,373 3-D theaters.

Nonetheless, Pachter maintained his neutral rating on the stock and a price target of $44 per share, citing the film’s staying power and lack of ‘serious competition’ until June 18, when Disney/Pixar releases ‘Toy Story 3’ in 3-D.

Like DreamWorks’ ‘How to Train Your Dragon,’ which also had a disappointing opening, the latest ‘Shrek’ film could benefit from strong audience ratings as positive word-of-mouth spreads. Market research firm CinemaScore gave the film an ‘A’ rating based on a survey of audiences who had seen the film.

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-- Richard Verrier

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