4/8/2008
By Brian Sozzi

THQI Inc. (THQI)

• Industry: videogames
• Sector: computer software

The company engages in the development and publication of interactive entertainment software for various game systems in North America, Europe, and the Asia Pacific region.  Although we were largely disappointed by THQ’s holiday quarter performance, from relative and absolute perspectives, we are recommending the stock at this time based on a compelling initial FY`09 title release slate and a renewed effort by management on facilitating better game quality.  Over the past two months, we have received considerable visibility into THQ’s FY`09 release schedule and we must say the situation looks promising amid a host of new intellectual content.  In particular, we are calling out Battle of the Bands, Big Beach Sports, and deBlob as potential strong sellers for the Nintendo Wii game console given there creative game play attributes.  Moreover, from what we can tell these titles are garnering favorable preliminary assessments from industry review firms which could help to build buzz among gamers ahead of the eventual launch dates. 

When factoring into the mix the next installments in the Red Faction, Saints Row, and WWE franchises and THQ should be able to drive a meaningful improvement in FY`09 earnings that in our view is not currently priced into the stock.  As such, we are modeling for the stock to hit appreciate to $27.00 over the scope of the next twelve-months, implying upside from the current level of 20.8%.

Key Calendar 2008 Titles

• Saints Row 2 (Xbox 360, Playstation 3)
• Red Faction 3 (Xbox 360, Playstation 3, PC)
• Wall-E (movie-based)
• Company of Heroes Online
• deBlob
• Big Beach Sports
• Battle of the Bands

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