DreamWorks Upgraded To Outperform On Heels Of Global Netflix Deal

DreamWorks Animation SKG, Inc.'s stock was upgraded to outperform from market perform by FBR & Co. analyst Barton Crockett. The upgrade comes on the heels of its deal with Netflix Inc. , which gives the streaming giant global rights to DreamWorks TV content and full access to its film library. Netflix recently launched in 130 new countries. "We assume that Netflix pays a license fee in the high tens of millions of dollars, with high contribution margins since film production costs are already amortized, driving total film library revenues to near $100 million in the fourth quarter of 2015," Crockett wrote in a note. The Netflix deal pushes his per-share earnings estimate for the fourth quarter up to $1.04 from 3 cents per share. Given that DreamWorks licenses most of its TV and film content to Netflix, it leaves the company exposed if Netflix's business falters or simply begins to look elsewhere for children's content. Crockett wrote that DreamWorks' "Kung Fu Panda 3," out Jan. 29, should perform well. Without any significant animated features scheduled for February, he said the film could garner $185 million to $200 million domestically, and he expects it will play well in China as well. Crockett raised his price target on DreamWorks to $29 from $22. Shares of DreamWorks rose 15.4% over the course of last year, outperforming the S&P which fell 0.7%. DreamWorks is down 5.2% so far in 2016.