|2 posts found|
OP 4/20/12 6:09:49 PM#1
As low as 46 cents, now at 76 cents. Could THQ finally be getting the hint and turning it around?
Needing is Wanting...
"Manhood is patience. Mastery is nine times patience" -Ogion the Silent
4/22/12 8:16:48 PM#2
Before market open on Wednesday, THQ preannounced positive Q4 results. The company now expects Q4 net sales of $160 – 170 million, above prior guidance of $130 – 150 million. Stronger-than-expected sales will be driven by Saints Row: The Third, UFC Undisputed 3, and digital. THQ also announced nonGAAP EPS of $(0.20) – (0.10), above prior guidance of $(0.50) – (0.35).
THQ now expects to end FY:12 with $76 million of cash, well above its previous estimate of $25 million. It also expects to utilize a substantial portion of its cash and its credit facility as it launches FY:13 releases. We believe a reduction in expenses will allow THQ to preserve cash and fund operations through FY:13.
Raising our Q4:12 estimates to reflect today’s preannouncement. We now expect Q4 revenue of $170 million and EPS of $(0.10), both at the high end of revised guidance, and above our prior estimates of $150 million and $(0.33).
Wednesday’s announcement follows a difficult start to the calendar year. In January, THQ announced it would exit the kids licensed business to focus on core franchises and digital. Soon after, it announced a restructuring plan that would result in up to 240 SG&A personnel being laid off. On its Q3 earnings call, management disclosed that FY:13 revenue would be roughly half the FY:12 amount. Finally, in late March, it announced that Warhammer would be released as an RPG, not an MMO, and headcount reduction at two internal studios totaling 118.
We remain unconvinced that THQ will be profitable in FY:13. In order to “rightsize” its overhead to fit its sharply reduced revenue expectations, THQ will have to lower expenses substantially by reducing payroll. THQ has misjudged its portfolio in the past, and it is not assured of making the right decisions in FY:13. In the past, THQ has been unprofitable in years with much higher revenue.
THQ will report its fiscal Q4 2012 (ending March) results on Tuesday, May 15.
Maintaining our NEUTRAL rating and our suspended price target. Given THQ’s uneven financial performance and history of financial losses, it is difficult to estimate when or whether the company will return to profitability, and equally difficult to determine a value for its equity. We advise investors to remain on the sidelines until the company can show a clear path to profitability.