Analyst: UFC 2009 To Top 4 Million This Year, Aid Turnaround For Uncertain THQ

THQ's UFC license will play the most prominent role in whether the company can achieve profitability, and its UFC 2009: Undisputed could top over 4 million units this year, says Wedbush Morgan analyst Michael Pachter. According to the analyst, however, it's unclear that the franchise can keep growing annually -- Pachter points out that the realism of the genre limits the ability to mix characters in the same way as THQ could do with its WWE license. "However, the company intends to produce UFC games annually, improving game play and enhancing features in order to attract higher sales each year," he says. "It is likely that the UFC will increase its reach internationally, and THQ’s plans to produce future games on the Wii and the handhelds could allow for significant growth as early as next year." As for the company's other key licenses -- WWE and Pixar, which were primary drivers for THQ in the past -- don't expect continued growth, Pachter warns. The publisher's Up film tie-in is seeing lower sales than previous Pixar games, there will be no Pixar game next year, and the last title under the licensing agreement won't arrive until fiscal 2010. As for THQ's WWE game, Pachter expects sales to be flat at best: "We think that this expectation is reasonable and realistic, as we expect a discounted UFC title at holiday to offer a tempting alternative to regular WWE game customers still feeling the effects of the recession." Pachter is pessimistic on whether the company's Red Faction Guerilla and Darksiders can generate meaningful sales -- but even still, he feels the company's prospects are "much improved." Yesterday THQ reported an impressive 95 percent decrease year-over-year in its operating losses, cutting the gap from $115.3 million to $5.6 million, even while revenues fell 39 percent to $101.3 million from $164.8 million. "While we are truly impressed with the company’s rapid turnaround, it is far from certain that THQ can grow revenues and earnings for the next several years, unless it is able to establish at least one more bona fide franchise to offset the ultimate demise of the Pixar license," says Pachter. "We do not expect Darksiders to end up as a recurring franchise, and while we were encouraged by early footage of Homefront, it is too early for us to conclude that this game will constitute a franchise," the analyst adds. He's looking to revenue growth next year, expecting the publisher to release a third Saint's Row and a movie license for DreamWorks' Oobermind, which should offset the Pixar gap and the absence of Red Faction.