Analysts: Expect 'Ratty' Q2 From THQ

Ahead of THQ's Q2 results expected in early November, Wedbush Morgan's Michael Pachter and Janco's Mike Hickey have predicted THQ will underwhelm for the quarter, as neither its Pixar licenses or Juiced and Stuntman generate significant sales. Pachter notes that compared to the 1.3 million units its Cars licensed titles sold, Ratatouille has fallen far shorter, with some 503,000 units sold since June. Similarly, Stuntman: Ignition and Juiced 2: Hot Import Nights, at a respective 104,000 since August and 55,000 in September, are "well below" Wedbush expectations. As a result, Pachter has lowered Q2 sales estimates to $225 million from $244 million, and fiscal 2008 results from $1.15 billion to $1.09 billion. He says, however, that he remains confident about THQ's long-term outlook, with a strong lineup of calendar 2009 games. Janco's Mike Hickey has echoed many of the same concerns, primarily targeting Juiced and Stuntman. Hickey questions THQ management's claims that any owned-IP losses would be made up with sales of licensed games. "In our view," said Hickey, "their holiday game pipeline is lost to the market, with their casual/kiddie releases under significant competitive pressure (Nintendo) and their core games lost under the buzz cloud from next-gen games including Halo 3, Call of Duty 4, Guitar Hero and Bioshock." He points out that by the end of the 2006 holiday season THQ had shipped 3 million units of Cars, and 4 million more by early 2007, but by the end of June had only shipped 1 million units of Ratatouille. "We remain doubtful Ratatouille and their upcoming Cars remix for the holiday will exceed the 7 million units of their original Cars release," said Hickey. "We expect several more years of next-gen (PS3/Xbox 360) installed base maturity before the Company’s kiddie mass market releases begin to show meaningful traction," he concluded. "Importantly, online Wii sales checks from Amazon.com show no THQ titles in the top 50 selling Wii games."