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

To: Kelvin Taylor who wrote (4651)	4/18/1998 1:05:00 AM
From: Bleeker	Read Replies (2) \| Respond to of 14266

Here are my notes from Lin, the Wedbush Morgan analyst. I spoke with him today, April 17. Wedbush is located in Los Angeles, CA. The firm downgraded THQI last Fall and upgraded early this week. Lin expects earnings of 41 cents, which is at the highest end of the 36 cents consensus estimate. While he raised his Q1 estimate by a couple of pennies, his full year estimate remains unchanged at $1.52. Lin expects THQI to have a P/E multiple of around 23. The sector average is higher. But in order for THQI to achieve a P/E above 23, it needs to have more polished games, he said. There are good signs of that happening in the coming quarters based on demos he has seen. He has seen previews for Bass Fishing (Q2 or Q3 release) and Brunswick Bowling (Q3 release) and was highly impressed by the quality of the graphics in both games and the 'phenomenal physics' of Brunswick Bowling. Lin said the games have potential to be franchise titles for THQI. I was surprised to hear it. Until recently, THQI games have lacked polished graphics. For example, WCW was plagued with visual snafus but gameplay was very strong, according to Lin. The new line up of games will have significantly sharper graphics, he said. He mentioned Red Jack in this category too. Another change Lin noticed from his visits to THQI is the higher quality talent the company is attracting from developers and programmers. He commended Farrell on the WCW decision. "Wrestling titles come and go," he said. By July 1999 THQI will already have had 5 wrestling titles and the market for this genre will be completely saturated. AKLM apparently is also releasing 2 wrestling games. So there will be a glut while interest in the genre cools. As for Rugrats, he expects it to be a 'slam dunk' on the Nintendo Gameboy platform but to perform less well on other platforms. Rugrats is a big title for THQI, he said. Given his 41 cent Q1 estimate, his price target is around $35. But I did the math and that would give THQI a P/E of only 21.3 and not 23 as he said. $37 would take us closer to his P/E target based on his Q1 estimate. His most recent report has a price target of $32. Go figure. If history is any guide, we need to add another $12 to Lin's target. Can someone post this on the Motley Fool's board please. cheers, Bleeker