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Pixar flops on Wall Street
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November 29, 1999: 4:40 p.m. ET
After shattering a box-office record, the film studio’s stock falls sharply
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NEW YORK (CNNfn) - Analysts were left scratching their heads Monday afternoon as shares of animation-production studio Pixar Inc. fell sharply despite having raked in more than $80 million during the holiday weekend from its long-awaited film "Toy Story II.”
After starting the day strongly, shares in Pixar (PIXR) fell as low as 43-1/2, nearly 9 percent off their opening price of 47-5/8, in Monday trading before recovering slightly to close at 44-3/16, down 2-7/16 for the day.
Meanwhile shares of Walt Disney Co. (DIS), which jointly developed and distributed the film, rose 13/16 to 28-3/8.
Pixar’s fall came despite the animated sequel to the 1995 hit movie "Toy Story” having grossed $80.8 million between Wednesday and Sunday - shattering the previous five-day record of $45.7 million set by "A Bugs Life,” an animated film developed last year by Pixar and joint partner Disney.
"A Bug’s Life” ultimately grossed more than $160 million domestically and more than $360 million worldwide despite stiff competition from three other animated films. "Toy Story II,” on the other hand, faces relatively weak competition from other family-oriented films.
"I’m baffled given the strength we saw in the box office numbers,” said Katherine Styponias, an analyst with Prudential Securities in New York, who raised her 52-week price target for Pixar to $54 per share last week in anticipation of a strong box office showing for "Toy Story II.”
"The only thing we can figure is there is some profit taking going on out there today,” she said.
"I don’t know anybody who expected such a strong showing,” said one analyst, who asked not to be named. "I don’t know what [investors] who are selling this one are thinking.”
Company officials were equally baffled by the stock’s performance.
"We’re thrilled with how it performed,” said John Dryer, a Disney spokesman. "We knew we had a really good film. We thought it was better than the last one and critics agreed with us.”
Analysts said there is one thing that might be confusing investors and that is Pixar’s current distribution agreement with Disney, which shares profits from all Pixar movies under a 1997 five-picture production agreement.
Under that deal, Pixar and Disney split the pictures’ profits 50/50 after Disney recoups the film’s marketing costs and is paid a distribution fee by Pixar.
A Disney official would not reveal either the marketing costs or distribution fee for "Toy Story II,” although the distribution fee is said to be much lower than it was for "Toy Story.”
"It’s a much better deal [for Pixar] than the original ‘Toy Story,’” said Paul Noglows of Hambrecht and Quist, who currently rates Pixar’s stock a "Buy” with a 52-week price target of $60 per share. Noglows noted Pixar likely only received about 18 percent of the profits from "Toy Story,” which ultimately grossed about $192 million domestically. The company’s take from this film will be much closer to 50 percent.
Some analysts are expecting "Toy Story II” -- which was originally slated as a made-for-video film -- to generate revenues upwards of $250 million domestically, which would give Pixar a hand in three of the top-five animated films of all time. Disney, creator of "The Lion King” and "Aladdin” can claim the credit for the other two. 
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