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kbroKaufman Bros. analyst Todd Mitchell sent a note to clients previewing the earnings report of THQ Inc. (THQI) - excerpt:

THQ Inc. (THQI) will report fiscal 3Q07 results Friday, February 2. Management will host a conference call at 11:00 a.m. EST.
THQ preannounced revenue of $475 million and GAAP EPS of $0.91. This was well ahead of its guidance of $400 million to $425 million and GAAP EPS of $0.65 to $0.70. THQ credited upside to sales of WWE Smackdown vs. Raw 2007!, Cars, and Avatar: The Last Airbender. We also believe THQ benefited from a weaker dollar as WWE and Cars were strong sellers in the U.K. and Europe.
We expect fiscal 2007 revenue of $1 billion and GAAP EPS of $1.01. We believe THQ sold about 3.5 million copies of WWE in fiscal 3Q07 for about $130 million and franchise sales should total $170 million in fiscal 2007. Cars also continued to sell well during the holidays. We estimate 2.9 million copies were sold in fiscal 3Q07 for $95 million for a total of 8.75 million copies and $269 million in sales in fiscal 2007.
For fiscal 4Q07 we look for $152 million and GAAP EPS of $0.09. Our estimates compare to guidance of $146 million, down from prior guidance of $145 million to $170 million, and GAAP EPS of $0.09, down from previous guidance of $0.17 to $0.22. The key titles for fiscal 4Q07 are all PC titles (Supreme Commander, Titan Quest: Immortal Throne, and S.T.A.L.K.E.R.: Shadow of Chernobyl).
We believe THQ can generate 18% revenue growth in fiscal 2008. We project $1.18 billion and GAAP EPS of $1.28, up from $1 billion and GAAP EPS of $1.01 in fiscal 2007. Our estimate is based on 18% higher software sales and 10% growth in THQ's mobile business. We assume Disney/Pixar is flat. We see some growth in WWE and the Nickelodeon franchises, but note that much of the upside implicit in fiscal 2008 comes from new and unproven IP.
We estimate the video game market will grow 16% in fiscal 2008. We project worldwide software sales growing 16% during THQ's fiscal 2008 to over $23 billion. Our estimates foresee a 70% increase in next-gen software sales to $10.9 billion from $6.4 billion during fiscal 2007, with handheld sales growing 11% to $6.5 billion from $5.9 billion, and current-gen sales contracting by 24% to $5.9 billion from $7.7 billion.
We think that shares of THQI are likely to tread water for a while. After hitting it out of the ball park with Cars in fiscal 2007 and taking advantage of a short window of opportunity with Saints Row, we that believe investors are skeptical about what THQ can do for a follow-on in fiscal 2008. At this point, we believe it is hard to say. Our bottom-up analysis would seem to indicate that it can grow with its current release slate if it can execute.
We reiterate our $34 price target and HOLD rating on shares of THQI. Our price target is based on 25.0x calendar 2009E FCF $100 million discounted to the present at 11.0%. We consider investment in THQI moderately risky.
Technical Analysis: Key technical ranges that investors should note are: $38.40 to $38.60, $34.50 to $34.75, $33.00 to $33.25, $32.00 to $32.50, 31.40 to $31.60, $29.85 to $30.10, $28.25 to $28.50, and $27.00 to $27.25.

THQI 1-yr chart
THQI 1-yr chart

Source: Earnings Preview: THQ Inc.