Markets, analysts respond to THQ lowering guidance

THQ's stock value has dropped significantly in the wake of the company's revised guidance and its decision to cancel several titles and close its Concrete Games studio.

At the time of writing, THQ was trading at USD 17.19, down USD 7.91 or 31.5 per cent.

Nevertheless, many analysts have maintained their optimism.

"While we believe that next year's prospects are even stronger after yesterday's preannouncement, we think that it is prudent to lower the company's earnings multiple given the increased execution risk from recent missteps," wrote Wedbush Morgan Securities analyst Michael Pachter in a note to investors.

Pachter is maintaining a "strong buy" rating on the stock, lowering his price target from USD 35 to USD 32, indicating that he expects THQ stock to return at least 20 per cent over the next six to twelve months.

Meanwhile, Lazard Capital Markets analyst Colin Sebastian maintained a "buy" rating with a USD 35 price target.

"We note that THQ is taking more aggressive steps to pare its product portfolio of lower quality and underperforming franchises, and to focus on proven franchises and titles with better potential, including WWE Smackdown, Pixar (Wall-E), Saints Row, Red Faction, and the new UFC license," Sebastian wrote.

THQ's revised guidance included charges related to the amortisation of underperforming titles such as Ratatouille, Juiced and Stuntman.

It announced that it would no longer develop games in the latter two franchises, and officially cancelled Frontlines (PS3), Destroy All Humans (PS2) and two other unnamed titles still in development.