Following
yesterday's Q2 report from Majesco which showed sales up from $11 to $14.6 million, Wedbush Morgan's Michael Pachter has said the firm has "greater comfort in Majesco’s prospects" despite "significant challenges."
Pachter said Majesco's Q2 sales were in line with Wedbush's expectations, and added that "operating costs were better than expected, as Majesco’s strategy shift in 2006 away from frontline big budget games has dramatically decreased development costs and operating expenses."
"We continue to believe that the company is on track for significantly improved results in FY:07," said Pachter, maintaining 2007 yearly sales estimates of $65 million, and 2008 estimates of $75 million.
"During Q2, the company’s revenues appear to have stabilized (excluding frontline titles), and as it has eliminated almost all development and marketing of premium frontline titles, its cost structure is much improved," Pachter added.
Despite "significant challenges," such as the company's continued search for a permanent CEO, Pachter said the firm is "becoming more optimistic that the company can produce budget console and handheld games profitably" and that with "further cost improvement," Majesco officials "could return the company to profitability."
Speaking on the $2.5 million class action settlement Majesco noted but did not expound on, Pachter said, "We view the possible litigation settlement as positive in removing negative uncertainty, though we acknowledge that payment of the settlement in stock may present some near-term pressure should the recipients immediately sell their shares."
"We think that Majesco has identified a casual game niche for the DS and Wii, and that the company has created a first mover advantage by filling this niche," he concluded, adding that Wedbush has "greater comfort in Majesco’s prospects now that the company has been able to stabilize revenues in the $12 – 13 million quarterly range, and believe that Majesco can be profitable at $65 – 70 million in annual revenues."
