Counting Angry Birds before they hatch: dev talks US IPO, analysts need track record

Angry Birds developer Rovio has been on a roll: raking in millions of unit sales, breaking through to the mainstream and recently receiving another $42 million from investors. Now the company is talking about going public on the Nasdaq with an IPO in the next five years.

"At an estimated value of nearly $300 million, it would still be considered a relatively small company," EEDAR's Jesse Divnich explained when we asked about the company's chances. "Gameloft, for example has a current market cap of $344 million (the cost for someone to own every share of the company), this is compared to Activsion which has a market valuation of over $12 billion, and Google at $185 billion. In fact, most large mutual funds typically don't invest in anything with a market cap under $1 billion. If they do, they typically classify them as 'high-risk' or 'aggressive plays.'"

Wedbush Morgan's Michael Pachter had similar reservations about the company telling Joystiq, "Any company can go public, but the rule of thumb is that the company has at least $50 million of annual revenue before they try to sell stock. That revenue has to be recurring, and I think that is an obstacle for Rovio, which so far is a one-hit wonder. If they can replicate what they've done with Angry Birds, there might be some interest."

Pachter also mentioned that the administrative costs of being public is about $5 million annually, which is why small companies don't usually take the stock route.

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Analysts weigh in on Homefront's potential profitability

Homefront has had an interesting ride so far. Touted as THQ's most pre-ordered game in company history, it debuted to middling reviews (ours included), which seemingly triggered a massive decline in THQ's stock price. Still, despite reviews, THQ announced over 375,000 units in first day sales. It's also worth noting that both Amazon and Walmart knocked $20 off Homefront the day after it released, which probably aided sales as well.

Whether or not Homefront proves profitable for THQ, well, that's where analysts come in! Speaking to Benzinga, Wedbush Morgan's Michael Pachter noted that THQ would need to move two million units to break even. In light of the need to move in excess of two million to yield a profit, Pachter called day one sales "a disappointing start," adding that poor reviews could lead to stagnating sales moving forward. That said, Pachter does expect the title to at least break even.

Bradley Safalow of PAA Research pins Homefront's low review scores on its short single-player campaign. Had the campaign been two to three hours longer, said Safalow, "then it could have achieved a Metacritic of 80." Safalow believes Homefront could bring in a "modest profit" for THQ, though he has much higher hopes for Saints Row: The Third.

Finally, Wall Street Strategies' Brian Sozzi expects Homefront to meet THQ's overall sales goals with the help of downloadable content. Like Safalow, Sozzi's firm is also "optimistic" regarding Saints Row: The Third and Red Faction: Armageddon.

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