Saturday, April 21, 2012

THQ Raises Earnings Guidance and Stock Soars

Just a short time ago, THQ Incorporated (THQI) received a delisting notice from the Nasdaq if it could not maintain a price above a $1 a share. Shares have not seen a $1 since December of 2011 but appear destined to hit the key share price after upbeat earnings from the company.
The fourth quarter loss will now be smaller than the company and analysts once projected. The net loss is expected to now be in the $0.10 to $0.20 range. Previously, the loss was predicted to be in a range of $0.35-$0.50. Net sales will now be reported as $160-$170 million versus projected $130-$150 million.
Saints Row: The Third sales greatly increased once the company did several price cuts to attract buyers. The uDraw segment has weighed down shares and hurt revenue. Stronger sales of the UFC Undisputed game also helped the earnings beat. A blog post I wrote back in January highlighted the new UFC game and the company’s potential. Here’s a look at sales of some recent releases:

North America/Europe/Japan/Rest of World/Total

UFC Undisputed 3 XBOX 360 0.36million 0.08 million 0 0.04 million 0.49 million

UFC Undisputed 3 PS3 0.28 million 0.12 million 0.01 million 0.06 million 0.48 million

Saints Row 3 XBOX 360 0.89 million 0.92 million 0.03 million 0.22 million 2.07 million

Saints Row 3 PS3 0.55 million 0.69 million 0.09 million 0.28 million 1.62 million

Saints Row 3 PC 0.07 million 0.11 million 0 0.03 0.21 million

Sales figures from

Earnings will now be reported on May 15th and this could lead to an increased share price once guidance for the rest of the year is reported. An update on the game release schedule could also push shares back over $1. The company will also report $76 million in cash balances. Along with its cash balance, the company still maintains a $50 million level of credit that can be utilized to release several games in 2012 and 2013.

The company will likely update the status on the highly anticipated Darksiders II game. The game will be a follow-up to 2010’s Darksiders, which sold close to a million copies on the XBOX 360 platform. The company’s recent UFC game is also helping earn the company additional revenue with downloadable character packs, including the recent International Fighters pack. The WWE games also have made extra money from downloadable character packs. In my recent blog post, I also mentioned how the company was expanding into social gaming including UFC and Margaritaville.

The fifty two week share price of the company is a wide $0.45-$4.67. Shares once traded for over $35 a share. I bought shares of this stock under $1 as I believe the company is producing enough money from several minor hits to keep its studio going. New releases will power the company further along or will lead to a buyout. A buyout is also very realistic as larger Take Two (TTWO), Electronic Arts (EA), or Activision (ATVI) looks to strengthen its portfolio and will gain the Saints Row, Darksiders, and UFC brands as well as others. I remain bullish on shares of THQI and think they are worth buying below a $1 a share.

*Disclosure - I own shares of THQI and ATVI

1 comment:

  1. if thq can ride out the quarters without saints row they'll do well. as consumers move back to games and away from facebook social games, thq will benefit.