THQ Scores Bonus

• Email
• Share
• Print

Shares of video-game powerhouse THQ (Nasdaq: THQI) popped up to a new 52-week high this morning before settling back a bit. The driving force was this morning's announcement of unexpectedly high sales.

Citing motocross game MX Unleashed, the company predicted fourth-quarter revenues of around $110 million and earnings of $0.12 per share. For the full year, the firm looks for $628 million in sales and $0.89 per share in earnings -- which includes a $0.06 one-time credit.

Back in October, fellow Fool Rick Aristotle Munarriz pointed out that a short-term drop in quarterly earnings belied a very strong-looking year. And back then, the pie-in-the-sky goals were $570 million in revenues and $0.85 per share. What a difference a few months make. The current net profit predictions are much hotter than last year's $0.32 per share.

Does any of this sound familiar? Yup, you heard the same kind of thing yesterday from Motley Fool Stock Advisor pick Activision (Nasdaq: ATVI). Together with the news of a recent price drop for Microsoft's (Nasdaq: MSFT) Xbox, it looks like video games are really on a roll.

Of course, this is the time when Fools should take time to step back and re-evaluate. Along with industry gorilla Electronic Arts (Nasdaq: ERTS), these game makers all trade around their 52-week highs, and retailers such as GameStop (NYSE: GME) and Electronics Boutique (Nasdaq: ELBO) are near the tops of the charts, too.

Given today's blowout of consensus estimates, there's little reason to put too much faith in analysts' numbers for next year. But today's price buys tomorrow's execution. THQ investors should make sure they're confident of future prospects before spending too much to celebrate this year's success.

David Gardner's recommendations for Motley Fool Stock Advisor subscribers have generated a total average return of 58.97% since the newsletter's inaugural April 2002 issue. Over the same time period, the S&P 500 has managed a 14.20% total average return.

Fool contributor Seth Jayson doesn't buy any video games anymore because he has no self-control whatsoever. He owns none of the companies mentioned in this article. View his Fool profile here.