I currently have calls out to try and assess the terms and breadth of the deal in more detail, but overall view this as a strong catalyst to the gross margins story in my prior writeup, where I noted that the stock could be worth upwards of 2.50 per share, if the company could maintain 28% margins going forward. I've also done a conservative back of the envelope value of the halo deal, which I have outlined below. Note that many of these assumptions are conservative guestimates.
Total Unit Estimate:
avg copies sold per halo iteration: 7.3M
% of customers buying faceplates: 5%
avg faceplates per customer: 1.1
Estimated unit sales: 400,000
Gross Margin Per Unit:
average MSRP: $22 (based on gears of war pricing)
average MCZ wholesale (guestimate): $15
average MCZ gross margin (guestimate): 50%
Profit per unit: $7.50
Estimated Impact (revenue, gross profit):
at 5% adoption: ($6M, $3M)
Because all other operating expenses are largely fixed, the additional GM would largely fall to the bottom line, after taxes, resulting in about $2M in net income. This would translate into an additional EPS of about $.04, which I expect would largely come in q3 and q4 of this fiscal year. I
also believe this may help the company secure future deals, including the lucrative GTA license.
I am still optimistic on the gross margins story here, and believe soon to be reported Q4 numbers (and, in particular, the gross margin number), will help give further indication of the profit potential going into next fiscal year.
MCZ 1-yr chart
