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Man, I remember loving THQ (NASDAQ: THQI). For a while, the company and stock were doing well; I recall watching it go from $20 a stub to $36 in recent times. But you know the old adage -- what goes up, must -- or, may, at least, when it comes to stocks -- come down. And down THQ came. Its recent quarter shows just how low things have gotten.
In the video game publisher's latest quarter, net revenue increased 7% to about $510 million. Kind of disappointing for a video game concern to post a top-line increase in the single digits for a holiday quarter that is supposed to be in the thick of the new console cycle. After all, Microsoft's (NASDAQ: MSFT) Xbox 360, Sony's (NYSE: SNE) PlayStation 3, and the juggernaut known as the Nintendo Wii are all stoking the flames of gamer interest. But the real disappointment can be found in the horrible bottom-line performance. Yes, even though THQ is the home to SpongeBob SquarePants, not even that wily, sweet, pineapple-dwelling creature could offset increased costs and charges related to canceled games (say good-bye to the Juiced and Stuntman franchises) to save THQ from posting a whopping 76% drop in diluted income from continuing operations: 21 cents per share versus 88 cents a year earlier.
THQ is well off its highs, and it doesn't seem to be the way to play the video game zeitgeist right now. I myself currently own Activision (NASDAQ: ATVI) and TTWO (NASDAQ: TTWO ). But, it would be way premature to count out THQ. Seriously, even though it is experiencing painful times, you can bet that management is feeling the pressure to turn things around. Doing some due diligence on a company when it is near its 52-week low can be rewarding. I don't expect THQ to take this lying down. It will presumably work hard to develop new fully-owned franchises (it was happy with the performance of its Drawn to Life Nintendo DS game; and don't forget that it has that crazy Destroy All Humans! series, as well as the Saint's Row brand, to work with) while leveraging the valuable Nickelodeon and Disney (NYSE: DIS) Pixar licenses (a game based on the next Pixar project, Wall-E, is due later in the year). It will be interesting to see how THQ gets its stock back on track.
As of this writing, Steven Mallas owns shares in Disney, Take-Two, and Activision.
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