UPDATE 1-Goldman adds DreamWorks to Americas Conviction Buy List

Fri Oct 2, 2009 8:29am EDT

Oct 2 (Reuters) - Goldman Sachs added DreamWorks Animation SKG Inc (DWA.O) to its Americas Conviction Buy List, citing solid year-to-date performance for 3-D films despite the weak economic environment.

The brokerage said it raised its six-month price target to $45 on the stock and its 2010 earnings estimates for the company to reflect strong income from 3-D films.

Earlier this year, DreamWorks Animation's first big 3-D film, "Monsters vs. Aliens", sold an estimated $58.2 million worth of tickets across the United States and Canada during its first three days. [nN29307752]

Hollywood is betting a lot on 3-D, with about 40 films scheduled to run in 3-D over the next three years in hopes that audiences will pay $3 to $5 more per ticket than they typically do to watch movies that feature characters and objects popping out of movie screens.

"Our higher, above consensus EPS for 2010 could prove to be conservative given our relatively low domestic and international attendance expectations for 2010 films, low conversion rates for theatrical attendance to DVD units, and potential upside from a weaker dollar," the brokerage said in a note dated Oct. 1.

In April, the company posted better-than-expected first-quarter net earnings as demand for its "Madagascar: Escape 2 Africa" DVD remained strong, despite industrywide DVD sale weakness. [nN28347217]

"We believe that the real potential for further upside to our estimates lies in international box office for Shrek 4," the brokerage said.

Shares of the company closed at $34.35 Thursday on Nasdaq.

(Reporting by Shrutika Verma in Bangalore; Editing by Deepak Kannan)

((shrutika.verma@thomsonreuters.com; within US +1 646 223 8780; outside U.S +91 80 4135 5800; Reuters Messaging shrutika.verma.reuters.com@reuters.net)) Keywords: DREAMWORKS/RESEARCH GOLDMAN

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