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Analysts More Cautious Than Investors as DreamWorks Animation Stock Takes 'Turbo' Tumble

Analysts More Cautious Than Investors as DreamWorks Animation Stock Takes 'Turbo' TumbleAnalysts More Cautious Than Investors as DreamWorks Animation Stock Takes 'Turbo' Tumble

DreamWorks Animation's stock has fallen more than 6 percent so far on Monday, following the underperformance of it latest film, "Turbo," at the domestic box office.

The film, which cost a reported $135 million to make, debuted Wednesday. It grossed $31.2 million over the five-day weekend and $21.5 million over the three-day weekend. That's less than Universal's "Despicable Me 2," which grossed $25 million over the three-day in its third weekend in release.

Compared to other DreamWorks Animation releases, "Turbo" ranks among the weakest, opening just south of last year's "Rise of the Guardians."

Though investors responded negatively to the film's performance, analysts remain mixed.

Also read: 'Turbo' Aims to Break DreamWorks Animation's Box-Office Addiction

Vasily Karasyov, with Sterne Agee, argued that the film reflected a serious challenge to the company's business model -- increased competition, with greater output from Sony, Fox's Blue Sky Studios and other new animation companies like Reel FX.

"We believe that the weak opening of 'Turbo' is not a one-time event but another illustration of the challenges to DreamWorks Animation's business model due to decreasing box-office opportunity and high-legacy production and releasing costs," Karasyov said in a comment. "Although the management's efforts to build new revenue streams received a lot of attention recently, they are not enough to offset decreasing film profitability."

Yet Tony Wible, an analyst with Janney Montgomery Scott, maintained a buy rating. He argued that people would look to sell now -- and indeed they are -- but is banking on a long-term upside given the company's recent forays into television and theme parks -- revenue streams that can offset declines on the film side.

Also read: 'The Conjuring' Buries 'R.I.P.D.' With Record $41M Box-Office Debut

"Any near-term weakness could provide a long-term buying opportunity," Wible said in a note. Ben Mogil, an analyst with Stifel Nicolaus said "investors will probably shoot first and ask question later."

The biggest risk to "Turbo," as both analysts pointed out, is that Sony's "Smurfs 2" opens July 31, just two weeks after "Turbo's" debut. That will lessen the "tail" for the film -- how much it makes in subsequent weekends.

Yet the real determinant remains the film's overseas performance. It grossed $22.6 million from 28 markets for Fox, its distributor.

The film has opened in countries that represent roughly 52.6 percent of the box office but has yet to debut in numerous key territories.

That leaves a lot up in the air.