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Analysts Bullish On THQs Future Despite 'Challenging' F08
Analysts Bullish On THQs Future Despite 'Challenging' F08
May 11, 2007 | By Brandon Boyer

May 11, 2007 | By Brandon Boyer
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Following THQ's Q4 and yearly results, analysts from Wedbush Morgan, Lazard, and A.G. Edwards have unanimously remained confident about the publisher's future, despite a "challenging" F2008 and a light forthcoming Q1.

Looking at THQ's original portfolio, Wedbush's Michael Pachter said, "We remain confident that new brands like Frontline, S.T.A.L.K.E.R., Supreme Commander, older brands like Stuntman and Red Faction, and recently introduced brands like Juiced will spawn sequels that will perform well," adding that the company's track record of eight million selling titles in 2007 will "continue with each of these brands."

"We are also confident that THQ has the right formula with tried and true licensed products, like WWE, SpongeBob, Bratz, Nicktoons, Avatar, and all things Pixar," he continued, leading Wedbush to conclude that "the company could set a record in FY:08 for the number of brands selling more than one million units."

Pachter was also confident on the company's focus on Wii and DS titles, as well as its history as the top third party publisher on Nintendo platforms, and added that THQ is "uniquely positioned to exploit the long tail we are seeing in the last console cycle" with "robust PS2 software sales to persist throughout 2007."

"We truly believe that THQ is an FY:09 story, concluded Pachter. "The company is well positioned to grow in line with the market in FY:09, and we expect the industry to grow by 16% next year. If THQ can grow revenues by 15% from the midpoint of its guidance, it will deliver $1.3 billion of revenues in FY:09."

Lazard's Colin Sebastian struck a similar note, saying that "we expect it to be challenging for THQ to gain or maintain market share in F2008; however, we continue to believe the company will benefit over the course of the new console cycle from a diverse product portfolio, growing international business, and an increasing mix of internally owned and developed software."

Sebastian said Lazard was not changing its F2008 sales estimates of $1.135 billion, and introduced F2009 estimates of $1.3 billion, but added that "in order to hit these targets, we still believe THQ will need to execute well across the board, including a few key titles on next generation platforms (e.g., Frontlines, WWE, Stuntman)."

"We believe there is potential upside to our peak earnings estimate," said Sebastian, "if THQ delivers a few more new hit franchises over the new cycle."


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