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

To: Marc Newman who wrote (3039)	1/14/1998 3:48:00 AM
From: Todd D. Wiener	Respond to of 14266

Marc- I, too, am interested to see how my estimates compare with the actual report. The only way that I could envision THQ falling significantly short of my estimate (reporting $0.60, for example) is if Pax sales were much lower than my field reports suggested. The information that I've received from the U.S.'s biggest markets indicates that Pax sold very well, despite a gradual slowdown in December. My analysis consists of an extrapolation of reported sales (by associates of mine in different cities, as well as my own traveling and researching). I could have overestimated Pax sales if my sample was not indicative of the overall population of retail outlets. I don't think that this possibility will significantly cripple my estimate's reliability, but I'd be interested to see how accurate my estimates are. When I review the details in February, I'll be able to improve my field analysis and overall estimates for future quarters. One reason that my numbers have been so much higher than the Street's numbers is that I'm not trying to low-ball the market. In other words, the brokerage analysts have to be conservative enough so that they can increase their estimates every 2 weeks or so. I shoot high from the beginning, so I don't need to continuously raise my estimates. I'd also like to think that I understand THQ better than the other analysts. One thing's for sure- If THQ misses my estimates, it's not going to kill the stock. If it misses the Street estimates, it will drop like a stone. Therefore, I'm not afraid of making bold estimates. Perhaps a more well-rounded approach to judging THQ's quarterly results is to figure a consensus estimate with the Street's 3 estimates and mine. I believe that the Furman Selz estimate is still $0.39 for Q4 (unless it's been changed). Wedbush's number is $0.47, Gerard's is $0.50, mine is $0.68 (accounting for my realization that FIFA and NBA weren't shipped in Q4). There is a W I D E range of estimates here, with a mean value of $0.51 for Q4, and $0.97 for 1997. Even though I believe that my estimates (for 1997 and 1998) are much closer to the actuals than are the Street estimates, it's only fair to average the 4 estimates. According to this "new" consensus of $0.51 for Q4, THQI is now trading at about 21 times FY97 EPS. The "new" consensus for FY98 is $1.25. I haven't included MacPax in Q1, because I've not been notified that it's in stores yet. It should add a few cents to EPS, though. I do think that with MacPax, Q1 could be $0.40, so we may see Farrell push out a few titles into Q2. One possibility is Broken Sword. I also think that Q2 will have a few pushouts into Q3, so that THQ can report sequential increases in EPS. Likewise, Q3 may have some pushouts into Q4, to make sure that Q498 can beat Q497. My $1.65 estimate for 1998 consists of substantial increases in EPS for Q1, Q2 and Q3 (approximately 2 triples and a double). Based on THQ's current product schedule (and my conservative unit sales projections for Pax, Quest 64, Rugrats and several other possible hits), Q4 1998 will not make $0.50. However, THQ will most likely announce several more games for 1998 release during the next few months. That's why I'm not concerned at all that THQ will miss Q498. Todd