|Top Percentage Losers -- Monday, May 24, 2010|
|Company Name (Ticker)||Intra-Day Price||Intra-Day
|52-Week High||52-Week Low|
|Dreamworks (NYSE: DWA)||$30.81||-11.6%||$44.77||$25.70|
|Popular (Nasdaq: BPOP)||$2.94||-4.0%||$4.23||$1.00|
|New York & Co.
|*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 11:00AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.|
Disappointing Shrek Opening weighs on Dreamworks
Shares of Dreamworks Animation (NYSE: DWA) are off by more than -11% after Shrek Forever After generated $71 million at the box office this weekend - below industry forecasts of $85 million, and a weaker opening than the prior two films in the franchise. for higher ticket prices in place compared with the last version of the Shrek franchise, actual attendance is more than 50% below the prior effort, highlighting the fact that the animated series has likely run its course.
For investors in this entertainment company, there are two key issues. First, the annual output of animated films is rising from an average 2.5 films to three new films per year, which could yield good operating leverage, as long as those other franchises don’t show audience fatigue too quickly. And will decisions by major movie theatre chains to sharply boost prices kill traffic? That was a key factor behind the steady sell-off at Carmike Cinemas (Nasdaq: CKEC) before a Friday rebound.
Right now, analysts think Dreamworks’ growth in earnings per share is likely to stall out in the $2.50 to $2.90 range over the next three years. After Monday’s sell-off, shares trade for about 11 times the mid-point of that range. That’s a reasonable price. Then again, this morning’s pullback puts the stock right back in the $30 area, where it has traded for much of the last five years.
Action to Take --> Shares look intriguing as a very short-term play, as the Memorial Day weekend box office receipts for Shrek Forever After could provide some upside. But beyond that, a lack of near-term catalysts makes this a stock to watch rather than buy.
Popular Spooks Investors
Shares of Popular (Nasdaq: BPOP), a Puerto-Rico based bank that also serves the U.S. Hispanic market, are off -6% this morning as investors wait for another shoe to drop. The bank just issued a terse announcement that its president is no longer with the company. Without any reasons given, investors must assume the worst. In these instances, it is always prudent to shoot first and ask questions later. Popular operates in the heavily-regulated banking industry, and you can expect a high degree of scrutiny from watchdogs after this morning’s announcement.
But the ink is still wet on a deal that will enable Popular to boost market share in Puerto Rico. Early this month, Popular assumed control of the assets of bankrupt Westernbank Puerto Rico, which should boost its already dominant 27% market share of the island’s banking activity closer to 40%.
So although this morning’s announcement is quite concerning, shares are likely to represent real value –once the key questions around the executive departure have been answered.
Action to Take --> Wait to find out why the bank’s president was hastily removed. If the impact does not appear to onerous, be prepared to pounce on what is now a very cheap bank stock. But also know that patience will be required, as the Puerto Rican economy is mired in a slump that could last into 2011. This could be a great long-term pick, with lots of short-term noise.
Selling Continues in Retailer New York & Co.
Shares of New York & Co. (NYSE: NWY) are off another -2.5% on Monday, and have now fallen for five straight sessions. In that time, the retailer’s stock has lost more than one-third of its value. Management has been working to turn the ship around by improving its website, and updating its product styling while making sure that inventory wasn’t too lean -- a long standing issue. Shares rose steadily in April on hopes that quarterly results would strengthen, but last week’s tepid earnings report dampened hopes.
Yet the quarterly report had some clear positives: same-store sales grew +2.9% in the fiscal first quarter, the first positive showing in six quarters; online sales grew +33% from a year ago; and a planned increase in outlet stores should minimize the need to heavily discount goods at its core stores. Moreover, shares now trade at just 1.1 times tangible book value and around 25% of sales. That’s quite low for a retailer.
Action to Take --> Shares are likely to tread water at new lower levels, but value-oriented investors are likely to start noticing this stock on their screens. The turnaround will take some time, and shares would double if management hits its long-term targets. Shares have likely hit bottom on Monday’s weakness, and though patience is required, the (long-term) reward outweighs the risks.