Todd, thanks for sharing your thoughts. I have found your opinions very useful over the past few years. However, I too disagree with some of your conclusions. First, regarding management's credibility, I think that they were trying to maintain it with Wall Street by contacting the analysts individually. So while we, the small investors were taken by surprise, the folks who shape Wall Streets opinion were not. Unfair to us, most certainly. But I think that Farrel has kept his credibility on the Street, which is why the stock is still rated a buy despite the upcoming weak quarters.
Second, your post fails to take into account THQ's current price. I think the bad news is already built into the stock's price. What we don't know, but the analysts apparently do, is why Q1 and Q2 will be so weak with respect to earnings. At least those who have been told the story believe that the weakness is temporary. If that is the case, then this is definitely not the time to sell.
The situation here reminds me of the blow up in UIS last fall. The company had been going gangbusters and suddenly hit a bump because of Y2K. The stock fell like a rock as many investors bailed. UIS stock has since then risen about 50%. Admittedly, UIS handled the situation far better than THQ in that UIS told everyone, analysts and little investors alike, the bad news at the same time.
In sum, I do not think that Farrel has lost credibility with the heavy weights in the investment community. The stock appears to be making a bottom. If Farrel handles the conference call well next week, the stock should be able to recover, over the next few months, at least a substantial amount of its lost ground. |
