Analysts unfazed by THQ free fall
By
Tom Magrino
Industry watchers Sebastian, Pachter, and Wilson react favorably to publisher's paring of franchises despite stock-price plunge.
Yesterday, THQ poured out a vat of bitter medicine to gamers and shareholders alike. On the games front, THQ said it would be indefinitely garaging its underperforming Stuntman and Juiced driving franchises, canning the PlayStation 3 version of Frontlines: Fuel of War and the PlayStation 2 version of Destroy All Humans: Big Willy Unleashed, and closing its Concrete Games studio, which was at work on an unannounced game for fiscal year 2010. Investors received the unsavory news that the cancellations would yield a $27 million loss to THQ's bottom line, and that the publisher was shaving $40 million from its previously projected fourth-quarter revenues of $240 million.
THQ tried to spin what good news it had. The publisher revised its third-quarter revenue projection upward from $490 million to $509 million on the strength of WWE SmackDown vs. RAW 2008 and MX vs. ATV Untamed. But while the publisher tried to see a silver lining, the NASDAQ stock exchange saw things differently. THQ's price was in free fall, losing as much as 30 percent of its value. As of press time, the stock was down $6.61, or 26.33 percent.
While investors are speaking with their dollars, a handful of analysts are singing discordant tunes on THQ's current tribulations. Lazard Capital Markets analyst Colin Sebastian maintains his Buy rating for THQ's stock and views the publisher's move as a way to refocus on franchises that are in demand. "We note that THQ is taking more aggressive steps to pare its product portfolio of lower quality and underperforming franchises," he said, continuing, "and to focus on proven franchises and titles with better potential, including WWE SmackDown, Pixar (Wall-E), Saints Row, Red Faction, and the new UFC license."
In a note titled "We Think the Kitchen Sink Approach Positions THQ for Solid FY:09 Earnings," Wedbush Morgan Securities analyst Michael Pachter concurs with Sebastian, saying that the move trimmed away dead weight. "While this is a painful step," he said, "we think it positions THQ to grow earnings dramatically in fiscal year 2009, unburdened by these balance-sheet items." Pachter maintained his Strong Buy rating of THQ's stock, though he lowered the target price to $32 from $35.
However, at least one analyst is leery of THQ's hemorrhaging ship. Although not advising an outright sell, Pacific Crest Securities analyst Evan Wilson downgraded the publisher's stock to Sector Perform. "We are less optimistic about THQ's ability to capitalize on the industry's strength," says Wilson. "THQ has several potential catalysts in fiscal year 2008 (Wall-E, Saints Row 2, UFC)... However, we believe investors are better off waiting for a catalyst to materialize."
By
Tom Magrino
Tom Magrino has covered the games industry since 2006. He's been compared to Steve Martin by Ozzy Osbourne and Daniel Craig by Tim Schafer. His voice, heard largely on GameSpot's podcast, recalls that of Kermit the Frog. It ain't easy bein' Magreen.
41 comments
Hmmm... Too bad Frontlines isn't on ps3 anymore... Why the hell do they have to focus on wrestling and MX vs. ATV Bargain bin games!?!? Those pieces of crap are seriously the last things on earth I would ever want to play! THQ is really hit and miss I guess because S.T.A.L.K.E.R. was just amazing, as well as Dawn of War and Red Faction, games like those are what video games are all about. At least they didn't kick aside Clear Sky and Red Faction 3 those are games that will be must haves for any self respecting gamer XD
Can't believe some of you people. THQ has released multiple game of the year titles for the PC. Dawn of War and all the expansions, Supreme Commander, Company of Heroes, etc... Sure, if you're not into war games then you might try a different publisher, but IMO it is good that THQ is cutting out the crap in its lineup to focus on their bigger and better franchises.
im glad to hear of your bad times thq..you and gsc are crap companies and put out mostly buggy crap games..out break and stalker to name a few.. you will never run with the big dogs. you think to small and only of the few bucks you make from mercy buy.s just to have a title on the shelf..you do little to support your games and community..poor patches lack of quality controls and no sdk's etc will kill you every time.. you and gsc will all ways be half a hit wonders..you would rather make a lil money off of junk. rather then invest in the long haul and have a truly great game.. i will never buy from you or gsc again..rott in hell thq and gsc
I think they should hammer out a deal with Eidos, creating Lara Croft vs. Smackdown vs. Raw. I mean seriously. It would save everyone's bacon. Boy I hope that wasn't a 'disruptive' post. Hmmm.
Too bad about the PlayStation 2 version of Destroy All Humans: Big Willy Unleashed, but I hope THQ will bounce bavk on there feet and keep bringing as more awesome games.
THQ made some of the worst racing games every! Juiced sucked badly. If they would've done better with the level designs I'd say they wouldn't be going in this direction. Along with people going crazy and scared they'll go broke and selling stocks!
"We Think the Kitchen Sink Approach Positions THQ for Solid FY:09 Earnings" I think it should say: "We Think the Bathroom Toilet Approach Positions THQ for Solid FY:09 Earnings"
THQ stock falling isnt due to performance, its due to a wide range of sell off in the past week. We are going into a recession and investors are fearing the worst and selling their stock.
Stuntman needs to be kept because it is an outstanding game in so many ways but at least they didn't cancel the 360 version of Frontlines...I wanna play that game...the demo was pretty freakin cool so I am lookin forward to that release.
I like THQ's lineup, and I'll actually miss seeing those franchises in it's portfolio. Many of those games (Destroy All Humans, Stuntman) were hidden gems in my opinion
Actually I believe they let the STALKER franchise go. Seems like a bad move, as they were milked by GSC for years and let them go when they start putting out content every year, but they must have had their reasons. It's still one of the top publishers, contrary to what a lot of clueless people post here, as they do about every single publisher at the first occasion.
THQ try making a new decent franchise instead of putting all your hopes on crappy RAW vs. Smackdown. It's got the S.T.A.L.K.E.R franchise so its not all bad I suppose.
THQ is bringing us Homeworld 3, buy their shares now while they're low cuz when HW3 comes out its shares are going out of this world (pun intended)
Now you see? Brewster's Millions is an awesome graphic for an analyst story! Now how about some Trading Places and Boiler Room? ;)
why do they have to can the PS3 version of Frontlines I was so looking forward to it!
Wow some people have no clue. Saint's Row, Dawn of War and several of it expansions, Company of Heroes and it's expansion, Supreme Commander and it's expansion. Have you guys seriously never heard of these games? What about S.T.A.L.K.E.R? I'm surprised at some of the THQ hating I'm seeing here.
I must admit... Other than a few 8.0's-a few 9.0's for just the PC titles... THQ hasn't done anything exciting in... Eh, who knows...
Paul_TheGreat says: "Who cares about THQs games." Me. I have Supreme Commander and STALKER. THQ also published Company of Heroes and MLB Slam for the Ngage! Ok, maybe i shouldn't have brought up MLB Slam...how about Bass Master? No? Ok...fine, they don't have a lot of good games. :P
TH-Who??? Honestly, I can't remember playing a THQ game since....since...ummmm, I guess PS One??? That's not a good sign at all.
I can't even remember the last THQ game I bought. Oh yeah, Saint's Row but only after it was down to 30 bucks.......
Noone is interested to even click to see the news when the word "Analysts" shows up in the title.
well there Saint's Row 2 and a new Red Faction on the way this might make things alittle better
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