Wednesday’s Top Upgrades (and Downgrades): Dicks Sporting Goods Inc (DKS), Dreamworks Animation Skg Inc (DWA), Riverbed Technology, Inc. (RVBD)

DreamWorks? Dream on
And speaking of overpriced stocks and overoptimistic analysts, Dreamworks Animation Skg Inc (NASDAQ:DWA) just scored an upgrade from the analysts at Stifel Nicolaus, who relented this morning on their sell rating and upgraded the shares to neutral. Personally, I think Stifel is being too kind to Dreamworks Animation Skg Inc (NASDAQ:DWA), and I’ll tell you why.

Stifel apparently thinks that Dreamworks Animation Skg Inc (NASDAQ:DWA)’ new “The Croods” comedic cartoon will lift the company’s fortunes — and the company could certainly use a lift. Unprofitable over the past 12 months and priced at a lofty 20 times what it might earn next year, DreamWorks looks overpriced for the 13% long-term earnings growth it’s expected to produce. Meanwhile, Dreamworks Animation Skg Inc (NASDAQ:DWA) is burning cash, with “free” cash flow dropping to negative $33 million in 2012 — an even worse result than it achieved in 2011.

Fact is, Dreamworks Animation Skg Inc (NASDAQ:DWA) hasn’t had a truly “good” free cash flow year since about 2009, when the company generated $99 million worth of cash profit. (And even then, the firm wasn’t making as much cash as it claimed to be earning profits under GAAP.) With more debt than cash in the bank, it can’t afford to go hitless much longer.

Problem is, reviews of “The Croods” so far look mixed at best, with reviewers pointing out that DreamWorks’ stuff still isn’t up to snuff when compared to Disney‘s Pixar studios. While it’s certainly possible moviegoers will ignore the reviews and turn the film into a hit, I fear even that happy circumstance will prove too little, too late for Dreamworks Animation Skg Inc (NASDAQ:DWA) shareholders. The company’s overpriced already and needs a real blockbuster to become worth buying again.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Riverbed Technology and Walt Disney (NYSE:DIS). It also recommends DreamWorks Animation.

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