Midway Games Needs a Hit

Shares of video-game maker Midway Games(MWY) touched a new 52-week intraday low Tuesday as investors seemed to lose their faith in the company's ability to churn out a blockbuster title this holiday season.

While Midway's stock bounced back in the session to reach positive territory at $4.30, the shares are still down more than 50% from their 52-week high of $9.33.

It could get even worse for shareholders if Midway's game Stranglehold and an upcoming release, BlackSite: Area 51, don't find favor among gamers this holiday season.

"If BlackSite: Area 51 fails to live up to management's expectations, in tandem with a Stranglehold miss, it could cause Midway to fall into deeper financial troubles," says Brian Sozzi, an analyst with independent research firm Wall Street Strategies.

"I continue to look for the shares to move lower as the industry heads into its peak selling season," he says. "Competition will be tough from the likes of Halo 3, Bioshock (from Take-Two(TTWO)), Rock Band (from Electronic Arts(ERTS)) and Call of Duty 4: Modern Warfare (from Activision(ATVI))."

Investor interest in Midway has largely hinged on the buying by the company's largest shareholder, Viacom(VIA) Chairman Sumner Redstone. Redstone holds an 87.5% stake in Midway, individually and through Viacom parent National Amusements.

But with Redstone seemingly distracted by an alleged feud with his daughter, Shari, who is the president of National Amusements, Midway's place in the Redstone portfolio is unclear, causing traders to flee the stock.