Pixar Animation Studios, the computer-animated film studio run by (and primarily owned by) Apple CEO Steve Jobs, has the golden touch putting out a string of blockbuster hits for Disney including Toy Story, Toy Story 2, A Bug’s Life and Monsters Inc. The company is also expected to hit big for the next several years with new movies that it’s cranking out at a rate of about one per year starting with next year’s Finding Nemo.
columnist, David Shook
wonders if the company has maximized its investor potential.
Because of the company’s consistent performance, its stock has been doing well, too — recently surpassing a two-year high and trading at 33 times this year’s projected earnings, according to Shook.
Shook asks, “So, the question arises: Will it come up with the string of blockbusters needed to justify the high valuation?” Some Wall Street analysts seem to think so. Pixar’s stock has been given high ratings from Gerard Klauer Mattison & Co. and Standard & Poor’s.
Because of the short development cycle of Pixar’s next three films, the company stands to collect on steady streams of related merchandising revenue, Shook observed. The company also has a stable of highly talented individuals who are well respected in the movie industry. That’s good, because Pixar isn’t alone in the field — other companies are also producing top-tier computer animated films. Shook pointed to PDI/DreamWorks’ Shrek, which narrowly outgrossed Monsters Inc. with US$260 million in box office receipts — about $5 million more than Monsters Inc. — and pulling home an Oscar too.
Shook pointed to the horizon and said that thanks to non-existent debt and a $300 million warchest, Pixar can afford to renegotiate its joint venture with Walt Disney Co. or even go it alone if it has to, once its current deal expires in 2005. Admitting that such machinations are a long way off, Shook said, “True believers may want to own the stock. But at its current price, many investors may find Pixar has maximized its star potential.”