The problem is that Farrell's "prognostications" are not correct. No way THQ only does $2.10 or so in 1999. So the comment about THQ not being a growth stock seems off base to me. I see very nice appreciation for THQ from here and still wouldn't be surprised to see a $40 price sometime in Q2.
Your second paragraph touches on something that I too find interesting. Farrell says he's not gonna climb out on a limb, yet I think that's the problem. There's a huge difference in investors' minds between the 20% rate that Farrell is "comfortable" with and say 30% growth. As we know, many investors think that one good way to value a stock is by giving it a PE equal to growth rate. But look at the difference in share price between a 20 PE for THQ and a 30 PE. That $20 or so is the difference between a nice gain and a monster gain. I think Farrell should admit that he's going to grow by 30%, even if it means he doesn't get to surprise (embarrass?) the street every quarter.
Man, just look at Q2. Last year we had low wrestling sales and a late (albeit large) release of Quest. This year we likely have at least equal wrestling, we've got Rugrats 64, we've got a surge in Rugrats PSX and the color GB release, and I believe Farrell said Sinistar. I see a big increase in year-over-year. [Edit, oops, I forgot to even include Shao Lin, the first true four-person fighter for the PSX. Think that will add even more, especially since it is shipping the first week of the quarter?] Q3 should be the same. Last year was weak, this year has Road Rash, both BASS console titles, etc.
I can make a case that Q1 and Q4 won't be hard to beat too.
Regards,
Marc |
