MCZ – Q1 2008 Earnings

By: ispeculatornew
Date posted: 08.21.2007 (12:00 am) | Write a Comment  (0 Comments)

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MCZ – Mad Catz Interactive (American Stock Exchange) (Closing Price – $0.94)

Madcatz reported its fiscal 2008 first quarter results last Tuesday and posted solid numbers.

Madcatz came in with revenue of 14.58 million and a net loss of 181 thousand (break-even on a per share basis). Revenues declined year over year due to the release of Real World Golf in the prior year. However, gross margin continued to improve and Madcatz was able to post break-even in its slowest quarter (both are significant items).

I was incorrect in my prior posts when I said the fourth quarter was MCZ’s slowest quarter. I looked at the results for Madcatz in the prior year and saw the increase in revenue from Q4 to Q1. I did not know about the Real World Golf release and assumed Q4 was the slowest quarter. I apologize for the mistake.

The insider selling during June is a lot more suspect now that I know Q1 is MCZ’s slowest quarter. The timing of the selling was very beneficial and I think it sends the wrong message to shareholders. If Madcatz’s management is going to trade their shares then why should investors hold long term? This is definitely something that should be noted next year.

If there hadn’t been so much insider selling the share price of MCZ would not have dropped so much. However, I don’t think the share price of MCZ will drop much further and I think the share price will trend up going into the holiday season. The results released this quarter are insignificant compared to what MCZ will post in the next couple of quarters.

Short term I think the share price will start to trend up in anticipation of the Halo release next month. The investors who have been sitting on the sidelines are also going to start buying in now that MCZ’s slowest quarter is behind it.  

I still think MCZ is a good buy and I would recommend accumulating more shares. I stand by my price target of two to three dollars which I think will happen between the third and fourth quarters of this year (the catalysts have already been mentioned in prior posts).

Disclosure: I currently own shares of MCZ.

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