Will Dreamworks Animations Theme Park Plans Help Reward Shareholders?

| About: Dreamworks Animation (DWA)

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Dreamworks Animation SKG Inc (NASDAQ:DWA) has announced its plans to open an indoor theme park. The company has partnered with Triple Five, a company that owns the West Edmonton Mall and the Mall of America. The new indoor theme park will be operated at American Dream Mall and entertainment complex in the New Jersey Meadowland. The move could be a precursor to Dreamworks' ability to turn its characters into theme park gold like The Walt Disney Company (NYSE:DIS) has for years.

The new theme park features characters from popular Dreamworks Animation. Here is the list of movies created by Dreamworks Animation:

  • Antz (1998)
  • The Prince of Egypt (1998)
  • The Road to El Dorado (2000)
  • Chicken Run (2000)
  • Shrek (2001)
  • Spirit: Stallion of the Cimarron (2002)
  • Sinbad: Legend of the Seven Seas (2003)
  • Shrek 2 (2004)
  • Shark Tale (2004)
  • Madagascar (2005)
  • Wallace & Gromit: The Curse of the Were-Rabbit (2005)
  • Over the Hedge (2006)
  • Flushed Away (2006)
  • Shrek the Third (2007)
  • Bee Movie (2007)
  • Kung Fu Panda (2008)
  • Madgascar: Escape 2 Africa (2008)
  • Monsters vs. Aliens (2009)
  • How to Train Your Dragon (2010)
  • Shrek Forever After (2010)
  • Megamind (2010)
  • Kung Fu Panda 2 (2011)
  • Puss in Boots (2011)
  • Madagascar 3: Europe's Most Wanted (2012)

As you can see, Dreamworks has a nice lineup of characters and has two movies that were turned into trilogies. Kung Fu Panda will be a trilogy in the next couple of years. How to Train Your Dragon was a huge surprise hit and already has a sequel in the works. Puss in Boots saw a successful spin-off from Shrek, and the Penguins from Madagascar will get the same treatment in a big screen movie as well.

Dreamworks Animation is attempting to do what Disney did by turning its characters into attractions at a theme park. This also sets up nicely for Dreamworks as Triple Five owns two other destination parks. This deal could prove as a trial run before licensing out characters across two other huge malls. Dreamworks could have three indoor theme parks in a matter of years, greatly expanding and diversifying its business.

The move to theme parks could also help Dreamworks test out new characters before they become the star of movies. Dreamworks Animation will release Rise of the Guardians on November 21, 2012. Can you imagine what some early interaction between characters from this movie and children at a theme park would do for box office revenue? Dreamworks could have characters like Jack Frost, Pitch, Santa Clause, Tooth Fairy, the Sandman, and the Easter Bunny placed throughout the park and create rides and interactive shows to build awareness of its new franchise.

Moves like this expansion into theme parks keep me bullish on shares of Dreamworks Animation for the future. Once considered just an animation movie company that couldn't compete with Disney, Dreamworks has now transferred into cruise ships, live shows, interactive games online, and even Broadway. In May, I outlined key reasons why to buy the stock and previously made the company one of my picks in my annual top ten picks for the year.

American Dream Mall is being built adjacent to MetLife Stadium, home of two NFL teams (New York Jets, New York Giants). The IZOD Center, former home of the New Jersey Nets and New Jersey Devils, is also located nearby, and still a popular center for concerts and other sporting events. Estimates call for 40-55 million visitors annually to the American Dream mall. The destination retail and entertainment facility comes complete with hotels, 50 restaurants, a movie theater, indoor ski and snowboard park, an indoor skating rink, indoor bowling alley, movie theater, aquarium, mini golf, and other entertainment options for tourists.

Dreamworks Animation will be releasing second-quarter earnings on July 31. Analysts are calling for $0.24 in earnings per share on $181.7 million in revenue. Both numbers are significant decreases from last year, when the company posted a profit of $0.40 on $218.3 million in revenue. Last quarter, the company posted a profit of $0.11, beating analysts' targeted $0.09 by 22%. Analysts call for $0.92 in full-year earnings per share, but may rise estimates if Dreamworks can pull out a second straight revenue beat. Shares are up 16% on the year, but have plenty of room to run with deals like today's and improved earnings.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DWA over the next 72 hours.

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