Star-struck Wall Street gave a dazzling welcome to DreamWorks Animation SKG Inc. on Oct. 28, sending shares of the animated film maker up more than 38% in their market debut.

NEW YORK (Reuters) -- Star-struck Wall Street gave a dazzling welcome to DreamWorks Animation SKG Inc. on Oct. 28, sending shares of the animated film maker up more than 38% in their market debut.

The shares touched a high of $39.50 and closed at $38.75 on the New York Stock Exchange, up from their IPO price of $28, which in turn was higher than DreamWorks Animation's estimated range of $23-$25.

The computer-animated film producer's IPO, the first in seven years by a major movie studio, rode high on the box-office success of "Shark Tale" and the summer hit "Shrek 2."

The rising share price gave DreamWorks Animation a market capitalization of roughly $4 billion, approaching that of its closest rival, Pixar Animation Studios Inc. But analysts expressed caution about the volatile nature of a business tied closely to box-office success.

Fulcrum Global Partners analyst Richard Greenfield, in a research note, said it is hard to value a company that has only a couple of key data points every year -- namely, the opening of each new film. "This is even more of an issue for DreamWorks Animation than Pixar, as DreamWorks Animation's track record is not nearly as pristine as Pixar's," he wrote. He started coverage of DreamWorks Animation with a "neutral" rating.

The IPO separates the animation group from the live-action unit of DreamWorks, formed a decade ago by Steven Spielberg, David Geffen and Jeffrey Katzenberg. It also allows Microsoft Corp. co-founder Paul Allen, an original investor in DreamWorks, to cash out his investment.

Based in Glendale, Calif., the public company will be controlled by Katzenberg, who will be chief executive, and Geffen, who will sit on the board. Roger Enrico, former chairman/CEO of PepsiCo Inc., will be chairman. Spielberg will not hold a seat.

Katzenberg said in an interview that he has committed to a new five-year contract with the animation company and will spend 90% of his time there.

DreamWorks Animation has laid out aggressive film-making plans, saying it will produce two computer-animated movies a year. On next year's calendar is the release of "Madagascar," and the first "Wallace & Gromit" movie, which is being produced with Aardman Animations Ltd., Katzenberg said.

He said the studio is working on its releases for 2008 to make sure it can meet its production targets.

Ahead of the IPO, there was concern among potential investors about the volatile nature of the company's earnings.

In the first six months of this year, when "Shrek 2" was released, DreamWorks Animation reported net income of $120.7 million, but it lost $187 million in 2003, when its movie "Sinbad: Legend of the Seven Seas" bombed at the box office.

According to regulatory filings, DreamWorks Animation sold 25 million shares in its IPO, while stockholders sold 4 million shares. It will use cash from the IPO to pay off debt and fund production.

The lead underwriters of the IPO were led by Goldman Sachs and JPMorgan.

Additional reporting by Bob Tourtellotte in Los Angeles