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Verizon Takes Big Stake In DreamWorks' AwesomenessTV: What Does It Mean?

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Pacific Crest recommends buying Dreamworks Animation Skg Inc DWA 3.49% shares after it announced the sale of its 24.5 percent stake in AwesomenessTV to Verizon Communications Inc. VZ 2.62%, which implied a valuation of $650 million.

Commenting on the valuation, Evan Wingren of Pacific Crest said, "This exceeded our expectations for its current value (we estimated ~$570 million in our SOTP), and represents a 100% increase from its valuation when Hearst bought a stake in 2014, and >400% from its $128 million purchase price by DreamWorks in 2013."

B.Riley, in a client note, said, "In terms of immediate financial changes, we estimate this (deal) could add about $1.08 per share in value to DWA. Longer term, we view this as another long-term positive move to diversify DWA's overall business – especially with the New Media segment (i.e., ATV) growing at a rapid clip since its May 2013 acquisition."

Dreamworks will own 51 percent of AwesomenessTV, while Hearst Corporation has the remaining 24.5 percent. Dreamworks sold 24.5 percent in...