Deutsche Bank Downgrades THQ, Inc (THQI) to Hold; Slashes Estimates on Industry Weakness

November 5, 2009 7:20 AM EST

Deutsche Bank downgrades THQ, Inc (Nasdaq: THQI) from Buy to Hold. Price target cut from $9 to $6.

Deutsche analyst says, "While THQ's turnaround towards a narrowed title lineup and improved profitability is continuing, a challenging industry environment in the Dec. quarter/beyond is resulting in higher marketing spend to support revenues. Beyond our lowered FY10 EPS ests, we think that higher marketing spend may eventually turn into price discounting, thereby impacting margins. Due to this risk and lowered earnings view, we see limited upside to shares."

"We are adjusting our estimates for FY10. For F3Q, we are now looking for revenues of $359mn (vs. $410mn previously) and EPS of $0.35 (vs. $0.71 previously). We now expect FY10 revenues/EPS of $880mn/$0.14 vs. $884mn and $0.27 previously. Underlying our FY10 assumptions are gross margins of 35% and operating margin of 1.6%. We are also introducing our FY11 estimates and are modeling revenues/EPS of $919mn/$0.22.The key issue lies in potential SW pricing weakness this holiday season."

To see more analyst ratings on THQI Click Here.

THQ Inc., together with its subsidiaries, engages in the development, publishing, and distribution of interactive entertainment software for various game systems worldwide.

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