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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Andrew C.R. Biddle who wrote (11712)	9/29/1999 2:36:00 PM
From: Brian MacDonald	Read Replies (1) \| Respond to of 14266

From II Online Publishers of Video Game Software Look for Rebound individualinvestor.com by Adam P. Lowensteiner, Senior Research Analyst (9/29/99) Part III THQ Inc. (NASDAQ: THQI - Quotes, News, Boards) $42.50 THQ, like Electronic Arts, is another stable play in the video game sector. The third largest company in the group, it had sales of $215 million in 1998 and sports a market cap of $500 million. Institutions own approximately 80% of the company's shares, according to Technimetrics. In addition, the company could also be an attractive takeover candidate, given that it has one of the strongest financial statements in the group. The company earned $1.38 per share in all of 1998, compared to $0.90 per share in 1997. In the June 30 quarter, the company earned $4.1 million, or $0.32 per share, on sales of $51.5 million. In the same period a year earlier, THQ lost $0.41 per share on sales of $29.4 million, but the loss resulted from a $7.2 million research and development write-off stemming from the acquisition of GameFX Inc. Most video game makers trade at about one times its sales, but THQ has been trading at nearly double its times sales. The company also has a gross margin above 50%. THQ also carries some heavy titles like Rugrats, WCW Wrestling, and Star Wars, which have contributed to its 67% increase in revenue during the first half of this year. THQ's stock has been on a tear lately. Early in September, it was trading in the low $30 range. But Tuesday's close of $42.50 may have removed much of the short-term argument behind buying these shares. The company has a chance to earn $3 per share next year, which leaves the stock multiple at a 14 times forward earnings. Behind that $3 per share estimate is the fact that THQ produces well known games for all the major consoles. WWF is the company's best title right now, and it is offering it for Nintendo 64 for the first time this season. THQ believes it will also be able to branch off of those well-known names to break into the new consoles that are coming out this year and next. If THQ is going to justify a higher multiple, it will need a significant boost from Sony Corp.'s (NYSE: SNE - Quotes, News, Boards) PlayStation 2, provided the console makes its debut in America next September as scheduled. If so, a multiple of 20 is not out of the question, but shareholders should exercise caution. It's worth noting that short interest has been climbing and stands at 3.4 million shares, or 11 days for the ratio to daily volume. But if THQ's growth continues, especially heading into the holiday season, shares could propel higher as a result of a short squeeze. individualinvestor.com