Brean Capital Sees Upside to Results, Downside to Guide for Take-Two Interactive Software

In a report published Wednesday, Brean Capital analyst Todd Mitchell reiterated a Hold rating on Take-Two Interactive Software TTWO. In the report, Brean Capital noted, “GTA and digital drive beat, fiscal 2015 guide disappoints. To little surprise, Take-Two beat F4Q14 expectations, reporting net revenues of $233 million and non-GAAP EPS of $0.21, ahead of guidance for $170-to-$200 million and $0.00-to-$0.10. Results were underpinned by Grand Theft Auto 5, which has now sold-in more than 33 million units to date, as well as higher digital revenue. However, fiscal 2015 guidance left us wanting. Management reiterated expectations for profitability during non-GTA years and looks for net revenue of $1.35-to-$1.45 billion and non-GAAP EPS of $0.80-to-$1.05. The company's pipeline of titles looks solid, with new iterations of Borderlands, Civilization, new IP Evolve, and an unannounced (Rockstar?) title. We continue to believe the primary route to EPS upside in fiscal 2015 lies with GTA Online, which offers interesting potential, although we do not yet see a coherent monetization strategy. We need further evidence of the sustainability of these revenues and consequently maintain our Hold rating.” Take-Two Interactive Software closed on Tuesday at $20.63.