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Sell-Side Analysts: Take-Two Is Not Playing Games

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Sell-Side Analysts: Take-Two Is Not Playing Games
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Take-Two Interactive Software, Inc. (NASDAQ: TTWO) released second-quarter earnings  Wednesday that came in above expectations, driven by consumer spending and the increasing popularity of gaming

The Analysts

  • KeyBanc Capital Markets analyst Evan Wingren maintained an Overweight rating on Take-Two with a $152 price target. 
  • Baird analyst Colin Sebastian maintained an Outperform rating and upgraded the price target from $140 to $145.
  • Credit Suisse analyst Stephen Ju maintained a Neutral rating and increased the price target from $136 to $137.
  • Morgan Stanley analyst Brian Nowak maintained an Overweight rating and raised the price target from $145 to $150.

Credit Suisse IDs Q2 Highlights

  • “NBA2K” grew roughly 70 percent year-over-year, driven by 85-percent growth in the game’s online presence in China, said Credit Suisse's Ju.
  • "WWE SuperCard" grew 47 percent year-over-year.
  • The company reported earnings of $1.05 per share against estimates ranging between 79 and 90 cents, the analyst said. 

Red Dead Redemption

Take-Two continues to reiterate the exceeding confidence surrounding “Red Dead Redemption 2” and its growth prospects, KeyBanc's Wingren said in a note. 

Initial sales for the newest release in the Western franchise amounted to 17 million, meeting estimates for Q3 as a whole, the analyst said. 

“The launch of 'Red Dead Online' has an outsized opportunity to drive RCS growth. We think this will begin primarily in Q4 (March). We believe RCS expectations remain conservative, and if 'GTA Online' has another expansion, expectations could prove to be meaningfully conservative.” Take-Two will likely reach 21 million units sold by December, according to KeyBanc. 

Other Franchises

The continued success of “Grand Theft Auto” online offerings has driven engagement across the board, said Morgan Stanley's Nowak.

Given the game’s success despite the rise of new titles, Nowak said he remains optimistic about the strength of periodic releases.

"On the 'NBA 2K' side, we believe that in the past, per-user digital monetization in 'NBA 2K' has been as much as 30 percent lower than comparable franchises like 'FIFA' and 'Madden,'" the analyst said.

"But 'NBA 2K''s huge recurring spend growth in Q2 could mean that the monetization gap is closing, and are bullish on the double digit increases in games played, payer penetration and spend per user that the company spoke to on the call.”

2019 Guidance

Overall, Take-Two's guidance for 2019 reflects the strength of “Red Dead Redemption 2,” said Baird's Sebastian.

The video game maker updated its 2019 guidance — "a sign of increased confidence following a strong launch for its blockbuster title," the analyst said. 

Take-Two expects 2019 net bookings of $2.8-$2.9 billion, up from a range of $2.7 to $2.8 billion, and implied non-GAAP EPS of $4.50 to $4.75, up from a range of $4.15 to $4.39, according to Morgan Stanley. 

Sebastian said the outlook may be somewhat conservative.

“Although management highlighted softer 'NBA 2K19' unit sales and expected declines in 'GTA' revenues will partially offset 'Red Dead' growth. Recurrent consumer spending is expected to remain roughly flat Y/Y as 'NBA 2K' monetization remains healthy.”

Price Action

Take-Two shares were down 2.23 percent at $123 at the time of publication Thursday. 

Related Links:

Take-Two's 'Red Dead Redemption 2' Has Blockbuster Release Weekend

Why Bernstein Thinks Take-Two Is Set To Outperform

Screenshot courtesy of Take-Two. 

Latest Ratings for TTWO

DateFirmActionFromTo
Nov 2018Morgan StanleyMaintainsOverweightOverweight
Nov 2018BairdMaintainsOutperformOutperform
Nov 2018JefferiesMaintainsBuyBuy

View More Analyst Ratings for TTWO
View the Latest Analyst Ratings

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