Majesco Entertainment: Here’s One Analyst’s Analysis

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

Majesco (NASDAQ:COOL): Large Q4 EPS miss as Zumba sales were insufficient to offset other product costs.  Revenue was $27 million, compared with our estimate of $22 million, consensus of $24 million, and implied guidance of $24 – 34 million. Y-o-y revenue growth was driven by Zumba release timing, as Zumba Fitness Core was released in Q4 of FY:12, while Zumba Fitness 2 was released in Q1. Sales were hurt by Wii and Kinect weakness. Non-GAAP EPS was $(0.07), compared with our estimate of $0.01, consensus of $0.02, and implied guidance of $0.03 – 0.13. Profitability was negatively impacted by accelerated amortization of  new releases (including  NBA Baller Beats) and higher marketing expenses.

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Weak guidance for Q1:13 and FY:13.  Given the company’s dependence on holiday sales (which were down at least 50% y-o-y), FY:13 revenue is expected to be significantly down from FY:12 levels. In addition, management expects to report Q1:13 non-GAAP EPS of a modest loss to breakeven, and a loss for the full year. Lower EPS expectations reflect high revenue concentration for a declining franchise (Zumba Fitness), with few new franchises to drive growth.

Lowering our FY:13 estimates for revenue to $85 million from $135 million, and EPS to $(0.10) from $0.25 to reflect guidance and a deteriorating outlook…