Janco analyst Mike Hickey has issued a report on THQ, raising the company's rating with the firm to Accumulate based on its potential as an earner in fiscal 2009 (which starts in April 2008) and its potential for return on investment, despite reservations about the company's current performance and its license-driven nature.
Janco's position is that the company's shares are currently underperforming for the video game sector, that its valuation is positive as regards its group, and that video game market growth will drive its value up.
Janco previously cautioned investors that
the company's reliance on licenses for its top-selling games, specifically WWE and Pixar, leave it somewhat vulnerable. Now, the firm also calls attention to the below-expectations performance of its owned IP,
Stuntman: Ignition and
Juiced: Hot Import Nights.
The series' very future was called into question. "We question whether
Stuntman and
Juiced remain legitimate franchises for the Company moving forward, after the recent releases provided lower than anticipated sales. Both of the franchises releases achieved higher Metascore quality rankings on the 360 then their prior release on the PS2, which casts doubt on game quality being the catalyst for lower than anticipated sales." Janco anticipates further
Juiced entries but the death of the
Stuntman franchise, consequently.
Hickey's report states, "With fiscal '08 financial prospects significant[ly] reduced, we have determined to shift our valuation focus to their fiscal '09 opportunity." Titles such as (Pixar-based)
Wall-E,
Red Faction 3,
Saint’s Row 2, and a UFC game assuage fears, though Hickey does advise some caution, as the
Red Faction franchise has "collected some dust" and
Saint’s Row 2 will face "significant competitive pressure" from
Grand Theft Auto IV.
THQ's fiscal results for Q208 will be released on November 1st. Other analysts
have also been less than complimentary to the company's performance in the run-up to the results.
