Shares of DreamWorks Animation Inc. soared nearly 38 percent on the first day of trading Thursday as investors anticipated Shrek-sized profits from the computer animation film studio.

Shares in DreamWorks' initial public offering were priced at $28 at the start of trading and closed at $38.75 on the New York Stock Exchange.

Analysts touted the company's short-term profit potential while cautioning about long-term risks, including its aggressive plan to release two animated films a year.

Rival Pixar Animation Studios releases one film a year. Until Thursday, Pixar had been the only other publicly traded computer animation firm. Pixar shares closed at $80.73 Thursday, up 91 cents.

DreamWorks Animation (DWA) offered 29 million shares to the public -- 4 million of which were sold by company executives. The firm will receive $659.8 million after underwriting discounts and commissions.

DreamWorks chief executive Jeffrey Katzenberg and Chairman Roger A. Enrico rang the opening bell at the stock exchange to herald the IPO. They were joined by film director Steven Spielberg and entertainment mogul David Geffen, who formed DreamWorks SKG 10 years ago with Katzenberg.

"To see this kind of vote of confidence in them from the investment community is really gratifying," Enrico said.

DreamWorks Animation is a spinoff of the parent company, DreamWorks LLC, which will remain privately held and continue to produce live-action films.

The highly anticipated IPO was oversubscribed, and the company said it would give its underwriters a 30-day option to purchase up to a 4.35 million additional shares of common stock to cover any over-allotments.

The money will be used to pay debt involving separation from its parent company and to finance the production of future films.

The company's public debut came a week before Pixar releases its sixth film, "The Incredibles," through a distribution deal with the Walt Disney Co.

Katzenberg said there was enough room in the marketplace for both companies.

"We look at them more as a sister company and one that we admire," Katzenberg said. "The degree to which we compete is we would like to enjoy the same success they have."

Analysts said DreamWorks will continue to benefit in the short term from the home-video release of "Shrek 2" and "Shark Tale." The studio will release two films next year, including "Madagascar," featuring the voices of Ben Stiller, Chris Rock and Jada Pinkett Smith.

But the company must still prove it can deliver consistent hits and compete against a growing number of companies that have said they will ramp up their own production of computer-animated films, analysts said.

Other risk factors for the stock include the fact that Katzenberg and Geffen will have 93 percent voting control of the company, leaving individual investors with almost no voice regardless of how many shares they own.

Insiders such as Spielberg and early DreamWorks backer Paul Allen can begin selling their shares after six months, creating potential downward pressure on the stock.

DreamWorks has had its share of flops in the past, including last year's hand-drawn feature "Sinbad: Legend of the Seven Seas." Its first animated television series, "Father of the Pride," has received lukewarm ratings on NBC.

David Geffen, left, and Steven Spielberg were on the NYSE trading floor for opening bell yesterday.