Wedbush's Pachter Previews Take-Two's Q4 Earnings, Remains Neutral

Take-Two Interactive Software, Inc. TTWO is scheduled to announce its fourth quarter financial results after the market closes next Wednesday. Ahead of the announcement Wedbush’s Michael Pachter shared a preview of the figures, which he expects will come in towards the high end of the guidance provided by management, helped by Grand Theft Auto V’s strong performance.

According to a report issued Friday, Take-Two’s ability to consistently post results above both its guidance and the Street’s consensus continues to impress experts at Wedbush. Moreover, they noted, Grand Theft Auto V’s “phenomenal catalog sales” and the ongoing –strong- performance of GTA Online poise the videogame maker to deliver robust profits over the foreseeable future.

Nonetheless, the firm remains “unwilling to recommend Take-Two shares” until they acquire “greater visibility into its long-term release pipeline.”

Consequently, Wedbush maintains a Neutral rating and $30.50 12-month price target on shares of Take-Two.

The Q4 Preview

On Friday, Wedbush shared a preview of Take-Two’s Q4 results. The analysts are modeling EPS of $0.25 on revenue of $300 million, below consensus of $0.26 and $306 million respectively. In addition, the experts are expecting Q1 guidance of $260 million to $310 million in revenue and $0.15 to $0.25 in EPS.

“The Q4 NPD sell-through figure implies non-digital standalone software revenue of roughly $125 million if applied to worldwide sell-in,” the note pointed out. In the previous quarter, recurring digital revenue came in at roughly $115 million, while non-recurring digital revenue were hit $98 million.

Therefore, the analysts believe “it is reasonable to assume that recurring digital revenue was at least $90 million in Q4, meaning that non-recurring digital revenue would need to be only $70 million to cross the mid-point of the guidance range. The Q4 launch of XCOM 2 should provide an incremental boost to non-recurring digital revenue,” they concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.