THQI reallly feels like a beach ball held under water. Reminds me of the behavior of Finish Line (FINL) during late 2007. I just couldn't understand how undervalued it got at the time based on earnings potential and balance sheet. If you look at the charts, FINL soared from $1.50 to $12 over the first seven months of 2008 during the rumblings of the financial crisis it was so mispriced.
THQI has a book value of $2.50 per share and it has oer $500 million of unused tax carry forward losses that are worth about $3.00 per share. So the "true book value" of THQI is somewhere around $5.50 and we are trading at $1.60. It is easily worth $10+ and that would still put THQI at a 50% discount to its peer gaming group. This is a Graham and Dodd value stock, and even satisfies the net-net rule if you count the massive tax carry forward losses it has
I like to wishfilly compare this to TTWO right before Grand Theft Auto 3 came out. That was a controversial game at the time and wall street had no faith at all in management. I was buying shares around $7 and sold at $13, just to watch it continue to run...
Point being the company was in a downward spiral that was out of control, management couldn't manage their way out of a wet paper bag, yet surprise sales of GTA3 made all the problems go away because it's all about $$$.
I know SR3 won't have nearly the impact and scale of game sales that GTA3 did, but it will help everyone forget how poor management's decisions have been if sales beat estimates by a considerable amount.
Just an example of someone reading the chart but not looking at the product the company produces. It doesn't make much since to say a company is worth so much more when their products are worth so much less.
Valid points. My best case is survival and $10+ on THQI, worse case is they go the way of its peers you mentioned, but my argument still stands. Even if they go under they have real assets of significant value to an acquirer such as ATVI or ERTS that can effectively use $500+ million in tax writeoffs. So my worse case is you get a buyout price somewhere north of $4. Still an attractive return.