SAN FRANCISCO -- Just because THQ's (THQI) video games won't shine as brightly as competitors' this holiday season doesn't mean the stock will lose its luster.
Juxtaposed against the most anticipated titles from rivals
, due out this fall, THQ's lineup of older hits, such as
, Nickelodeon-licensed titles, its franchise staples and sequels to its original games,
, seems to have produced investor anxiety.
But fears that THQ may be lost among its higher profile rivals during video-games' most important selling season may be overblown.
Shares of THQ are down 23% in the three months since May 10, precipitated by the company's announcement to
PlayStation 3-specific version of its hit game,
, first released in 2006.
In the same period, Electronic Arts shares are up 7%, and Activision's are off 8%.
EA is set to debut music-based game
Madden NFL Football 08
; Activision is drumming up interest for
Guitar Hero III
Call of Duty IV
, scheduled for the fall.
Comparatively, THQ has low-profile
, the upcoming sequel to
, as its holiday fare.
Those games are likely to have wide appeal among consumers shopping for children. And casual gamers will go for titles featuring Nickelodeon-licensed characters in
; while loyal sports fans may pick
WWE vs. Raw Smackdown 2008
from THQ's franchise stable.
"THQ gets a bad rap because its games for children are not as exciting as a
Call of Duty IV
Grand Theft Auto IV
," says James Lin, an analyst with MDB Capital, which makes a market in THQ shares.
But that doesn't mean its games won't find their customers. THQ could also profit from the low expectations and the stock selloff in the last few weeks, say analysts.
THQ shares ended Friday's regular session up 99 cents, or 3.7%, to $27.75. The stock was off $2.57, or 9.2%, after hours.
"They don't have the greatest lineup," agrees Todd Greenwald, an analyst with Nollenberger Capital. "But I don't think they will get lost.
"Expectations for THQ are not the same as for EA," says Greenwald, which means THQ could post a solid performance even while flying under the radar. Nollenberger does not own shares or have an investment banking relationship with THQ.
The company, which is still smarting from the pain of canceling its blockbuster
game, plans to release the sequel,
Saints Row 2
for both PS3 and
Xbox 360 next year.
, for example, which is heavily dependent on its
Grand Theft Auto
franchise, Agoura Hills, Calif.-based THQ believes it can still hold down the fort with its game roster.
Earlier this month, Take-Two dropped 14% on news that it would
push back the release of
Grand Theft Auto IV
from the fourth quarter this year to fiscal 2008, forcing the company to cut its financial outlook.
Shipments Are Sound
Investors could also do well to remember THQ's focus. The company has carved a niche for itself with its children's games, and the company's franchises have also brought stable returns, says Lin.
THQ has said it plans to ship more than 1 million games each of its five original titles --
Juiced 2: Hot Import Nights
Frontlines: Fuel of War
MX vs. ATV Untamed
Destroy All Humans
-- in fiscal 2008.
"They are always in this position every year, but they have survived many of these holidays," Lin says. "THQ goes for the family casual, mass-market audience, and they get knocked for that."
THQ has also increasingly
called attention to its portfolio of internally developed titles, such as
as opposed to its licensed games.
Investors should be watching sales of those games in particular to see if THQ can successfully build up its home advantage.
The most interesting of the company's releases,
, will launch on multiple consoles on Aug. 28. Additionally,
WWE Smackdown vs. Raw 2008
, which THQ will release on six platforms including the PS3 and
Wii, is likely to become a top-five holiday title.
"Needless to say, we feel really good about our holiday portfolio," says THQ spokeswoman Liz Pieri. "We are releasing games based on proven franchises that perform very well in the holiday time frame."