Why BofA Is Downgrading Take-Two After The Q1 Print

Take-Two Interactive Software, Inc’s TTWO solid first-quarter print and potentially strong fiscal 2021 performance seem priced into the stock, according to BofA Securities.

The Take-Two Analyst: Ryan Gee downgraded Take-Two Interactive Software from Neutral to Underperform and raised the price target from $155 to $166.

The Take-Two Thesis: The company reported first-quarter bookings Monday that were 15% ahead of Street expectations and earnings that were 44% higher, on the back of a healthy acceleration in recurrent consumer spend, Gee said in the Tuesday downgrade note. (See his track record here.)

RCS accelerated from 47% year-on-year growth in the previous quarter to 127% growth in the latest quarter, mainly due to the company’s "NBA 2K" and "GTA Online" video games, the analyst said. 

Take-Two raised the fiscal 2021 guidance, citing continued momentum from shelter-in-place tailwinds, he said. 

Take-Two’s most popular games could continue to drive meaningful profit growth even in the absence of new releases, Gee said.

The potential exists for another “highly accretive Rockstar title sometime in the next three years,” the analyst said. 

BofA raised its Take-Two earnings estimate for fiscal 2021 from $4.24 to $4.98 per share; lowered it from $6.09 to $5.25 for fiscal 2022; and raised it from $5.40 to $6.60 per share for 2023. 

“However, given downside to the latest close and a negative return, we are moving to Underperform,” Gee said. 

TTWO Price Action: Shares of Take-Two were trading 4.84% to $175.80 at last check Tuesday. 

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