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Stifel On Dreamworks-Comcast Merger Rumor: This Time Is Different

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Dreamworks Animation SKG, Inc. NASDAQ:DWA, Comcast Corporation NASDAQ:CMCSA - Stifel On Dreamworks-Comcast Merger Rumor: This Time Is Different

The Wall Street Journal reported Dreamworks Animation Skg Inc DWA and Comcast Corporation CMCSA have been in talks for the latter company to acquire the former.

Stifel’s Benjamin E. Mogil maintained a Buy rating on Dreamworks Animation, with a $34 price target.

It’s Different This Time

“While there has been speculation of DWA being a take-out candidate before, we view this time around as different as the company’s China and Television/ATV operations make it a more attractive candidate than before when it was largely a feature film business,” Mogil explained.

Mogil believes one of the main focus areas for the purchase are Dreamworks Animation’s China operations, which Universal would be able to expand. The analyst also noted the China operations “have favorable production/distribution treatments in place.”

The other area of focus is likely to be a strategic fit for Dreamworks Animation’s Television operations.

Television Outlook

Although the company has a multi-year output deal with several SVOD/OTT services worldwide, Mogil believes the deal “allows for second cycle licenses to be a combination of both SVOD, VOD and traditional TV licenses.”

Although it's unclear whether the second cycle license would permit a pure VOD license, Mogil expects some flexibility regarding output on a VOD services, or an AVOD service at the very least.

DateFirmActionFromTo
Mar 2016Pacific CrestInitiates Coverage onOverweight
Feb 2016B. RileyMaintainsNeutral
Jan 2016Topeka CapitalDowngradesHoldSell

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