Lots of possible reasons for the drop. None of them particularly rational. But this market is not being rational. So why should it be different with DWA? Reason 1) Mediocre Bee Movie results which investors may think will lead to the big disppointment in Q4 07, the same way they were burned by the Flushed Away dud last year. The fact that DWA's big money maker (and to some one trick Pony) has now come and gone, and won't be back for another 2 years. Reason 2) Unkown quantity of Kung Fu Panda which has been hyped alot. If it proves to be a diappointment, it will put DWA right back where they were in terms of needing to find a nother blockbuster franchise movie to counterbalance Shrek. Reason 3) The market is full of deals right now, particularly in the financial sector which has taken huge hits. Some of these are Fortune 20 blue chip companies whose current valuations are in some cases 50% off their prices 6 months ago. Investors would rather put their money into a big blue chip rather than a animated film company whose valuation always hangs on the success or failure of the small number of films it releases each year.
I truly think that DWA is way oversold and I look at it as buying opportunity bcreated by an irrational market. Shrek3 DVD sales will carry Q4 no matter what happens to Bee Movie (unless foreign BO is so bad that the movie doesn't break even). In terms of future forecasting, no ones seems to be very focused on Mady2 which earned more than $600mil WW, a BO figure almost any film would love to attain, But compared to DWA's Shrek films, it is a disappointment. If Mady2 does big BO numbers, like the first one, the street will start to look at DWA as a hit maker, like they did with Pixar, and readjust DWA valuations upwards. Even more exciting, if Kung FU Panda and Mady2 hit big, this stock will see $40 per share. Thre are alot of good things happening at DWA right now. Short of another Allen or Geffen selling spree, shares should start creeping up over the next few weeks as Shrek3 sales numbers get reported.