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THQI |
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In light of THQI's recent 23% drop on July 27, 2011, (after release of its Fiscal Q1 results) I wanted to initialize a thread about THQI, and the gaming industry in general, as this market sector presents a challenging area for investment, particularly due to the gaming industry's January 2011 downtrend.
The last mentioning of THQI, on the SI discussion boards, was on 1/5/2011. At that time THQI's stock was selling for $6.41. Currently it sits at $2.51, with a market cap of $171.5 million. Since January 2011, THQI realized a 60% drop in market price.
I believe this presents an opportunity for investment, particularly, because I view THQI as an undervalued company whose potential to grow outweighs its recent setbacks. We must focus on what drives THQI's revenue, which is of course game sales. The gaming industry relies on new and innovative ideas to drive sales. The ideas often start with the creative developers who have visions and aspirations, just like any other artist, to create a product that sparks interest within a wide range of audiences. The point being, brilliant developers spawn fruitful results for gaming companies.
For example, Rockstar Games, owned by Take Two interactive Software (TTWO), developed one of the most innovative gaming series of the past decade: Grand Theft Auto (GTA), by David Jones. GTAIII was released in 2001. Prior to its release, TTWO traded at ~$10. The GTA series had 6 subsequent releases, the last being in 2008. The development of GTA was a key factor in driving the price of TTWO from $10 in pre-2001 to $26.50 in 2008. In a 7 year span, TTWO experienced a 165% price increase.
Like TTWO, I believe THQI also invests in talented developers/programmers, such as renowned developer, Patrice Désilets. Patrice is scheduled to join THQI's team in 2012 to form a new THQ-owned development studio housed within its video game development studio in Montreal, Quebec. He will focus on developing new intellectual properties.
Acquiring developers like Patrice shows that THQI recognizes the importance of creative development. So I give five stars to THQI for hiring Patrice, and additional praise for entering into a new multi-year agreement with Guillermo del Toro, writer and director of Hellboy and the Oscar-winning Pan's Labyrinth; and entering into an agreement with Tomonobu Itagaki's Valhalla Game Studios to publish the studio's premier video game title, Devil's Third, for the Xbox 360 and PS3.
In summary, I would find it very surprising, and unlikely if THQI fails to develop successful ideas to generate greater revenues in 2012 and 2013, considering their investment in such renowned developers. I am therefore confident that returns will be promising in the next few years.
I invite comments, thoughts, or analysis conducted on THQI or other software companies.
Thank you,
FDiCianni
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