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THQ stock rises on analyst recommendation

Dawn of War publisher making progress in restructuring, says Pachter

Shares in THQ rose by over 12 per cent across the day yesterday following an investor note from Michael Pachter in which the Wedbush Morgan analyst maintained a Buy rating and noted that the publisher is making progress in restructuring.

The stock was up by 48 cents to USD 4.43 by the end of trading - its highest point since the middle of January.

Pachter was writing ahead of the release tomorrow of THQ's third quarter financial results, and predicted revenue in line with expectation at USD 420 million, although he lowered his earnings per share forecast from 15 cents to 7 cents.

But while he notes that the company's retail sales are down around 12 per cent on the same period the previous year, THQ was prepared for that eventuality and is focused on the future.

"THQ has chosen to restructure its operations, with studio closings and a new strategic plan focused on fewer titles, with emphasis on fighting games, children's games, family games and online games," wrote Pachter. "The restructuring involves the cancellation of several titles and a reduction in annual product development spending by approximately USD 100 million.

"Its prospects for next year are improved, and it should be in a good position to deliver the operating leverage investors have largely tired of waiting for, but execution risks remain high. We note recent reductions in spending on mobile phone games as evidence that the company is making progress in its turnaround."

THQ is set to release the hotly anticipated Dawn of War II for the PC platform later this month.

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Phil Elliott avatar

Phil Elliott