Wedbush Morgan's Michael Pachter has released his predictions for both THQ and EA's fiscal Q4 results ahead of their official results, increasing THQ's expected sales from $146 million to $160 million and holding EA's steady at $600 million.
Pachter says it expects "strong Q4 results above guidance and consensus estimates due to continued solid sales of WWE SmackDown vs. Raw 2007
" for THQ, especially considering NPD data which puts the publisher's U.S. sales up 34% over last year.
"We expect the company to remain cautiously optimistic about FY:08," said Pachter, "and expect guidance to remain unchanged," but adds that Wedbush is "confident about the company’s prospects for FY:08."
Largely this is due to THQ's support for the Wii, and what it sees as a "commitment to migrate from a majority of licensed products to a majority of owned intellectual property," which it expects will "allow THQ to grow earnings at a faster rate than implied by its guidance."
"We believe that the company will continue to maintain a dominant position on Nintendo platforms, and believe that its growing stable of owned I/P has positioned it to grow market share on the PS3 and Xbox 360 platforms," says Pachter, maintaining THQ as a strong buy.
As for EA, Wedbush expects the publisher will report "near the high end of its Q4 guidance, currently for revenue of $550 – 600 million," compared to its own estimates of $600 million in sales.
"Although EA is tracking behind the quarter according to data from the NPD group," says Pachter, "we believe that its sales are relatively stronger. The company’s U.S. retail sales are 12% lower than in the same period last year compared with the midpoint of its guidance for –11%."
"However," he adds, "this quarter’s releases included UEFA Champions League
which we believe sold much better in Europe than in the U.S.," and notes that "the company shipped two games (Command & Conquer
and Medal of Honor
) near the end of the quarter, providing some room to make up for disappointing sell-through."
On the mobile front, Pachter says Electronic Arts has "approximately $15 million in favorable foreign currency translation and favorable comparisons for its JAMDAT business, which contributed $15 million in the comparable period last year, and which is expected to contribute over $25 million in Q4. We believe that these items will provide sufficient cushion to allow the company to report at least in line with the consensus estimate of $587 million."
Looking forward, Pachter says Wedbush is lowering its 2008 Q1 estimates from $430 million to $385 million, "to reflect changes to the release dates for several games that we had originally thought would be released in Q1. The company has not provided a detailed release schedule for FY:08, and many of our assumptions about early release dates were likely too optimistic."