Analyst: Majesco Can Bounce Back

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities. 

Majesco (NASDAQ:COOL) will report Q2:13 (ending April ) results after the market close on Monday, June 10, with a conference call at 1:30pm PT (dial-in: 800-860-2442, webcast: r.majescoentertainment.com).

We expect Q2 results below our estimates and roughly in line with consensus. Our estimates are for revenue of $15 million and EPS of $(0.02), compared with consensus of $13 million and $(0.04). Majesco did not provide Q2 guidance. Our revenue estimate (down 51 percent, based on sell-in) is above consensus (down 58 percent, also sell-in) and the NPD figure (down roughly 60 percent, based on sell-through). Due to a light Q3 release slate, we do not expect Majesco to sell in enough product in Q2 to make up the difference between our estimate and NPD. The timing of the earnings release (on the first day of E3) suggests to us that the company is hopeful of avoiding the limelight (and they will most certainly succeed in doing so).

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We expect the company to maintain FY:13 guidance for revenue significantly below FY:12 and a non-GAAP EPS loss. Majesco’s release slate remains somewhat unclear, with only five months left in the fiscal year. Wii software sales continue to decline at a pace more rapid than Industry declines, with its replacement, the Wii U, unable to make up the short fall. Uncertainty remains around the next-gen consoles from Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE), with unknowns currently including actual release dates, pricing, and potential subsidies, among others. We do not expect more specific full-year guidance at any point in FY:13 as some of the aforementioned factors will likely remain through Majesco’s October year-end.

Our FY:14 estimates remain a guess, as we have little visibility into Majesco’s long-term release schedule. Although Majesco has been profitable in the past at the $100 million revenue level, our FY:13 and FY:14 estimates are below the breakeven level, resulting in projected losses for the foreseeable future. With only $31 million in cash (including $5 million due from a factor), Majesco will need to improve its financial performance in the next few years in order to continue as a going concern.

We are maintaining our NEUTRAL rating and our 12-month price target of $1. Our price target reflects cash of roughly $0.75 pershare, and reflects our confidence that the company can once again bounce back, as it has in the past.

Michael Pachter is an analyst at Wedbush Securities.

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