Brean Capital Sees Upside to Guidance Priced into Stock for Take-Two Interactive Software

In a report published Monday, Brean Capital analyst Todd Mitchell reiterated a Hold rating on Take-Two Interactive Software TTWO. In the report, Brean Capital noted, “We see upside to guidance, but think it is priced into the stock. Take-Two returns to ‘normalized' earnings in F2015. We think F2015 guidance for revenue of $1.35-to-$1.45 billion and non-GAAP EPS of $0.80-to-$1.05 is likely conservative. However, to what degree it is hard to know at this point. Certainly, we think the company likely has a hit in Evolve, and we would expect GTA V for next-gen to sell well. The wild card here is GTA Online, which with 33 million copies of the game sold since its release should be able to aggregate a large audience. Our questions are, to what degree will they be monetized, and what sort of margin contribution will this business have. So far Take-Two has declined to provide any sort of tangible metrics, and our own experience with the game leads us to believe that Rockstar's strategy for monetization is less effective than it should be. Over the past year, shares of TTWO have traded in line with the group, despite the company's lack of clear catalyst or disclosure. As a result, we think they are fully valued and we reiterate our Hold rating.” Take-Two Interactive Software closed on Friday at $22.39