Can Grand Theft Auto VI Come Soon Enough? Take Two Stock Dips Below Key Level As Analysts Weigh In On Zynga Purchase, Mobile Games

Zinger Key Points
  • An acquisition of Zynga could help Take Two launch its own titles as mobile games.
  • Shares are trading at historic lows based on earnings estimates.

Analysts sized up how the acquisition of Zynga fits into guidance from video game company Take-Two Interactive Software, Inc TTWO.

The Take-Two Analysts: Credit Suisse analyst Stephen Ju had a Neutral rating and lowered the price target from $139 to $137.

Barclays analyst Mario Lu had an Overweight rating and raised the price target from $171 to $175.

Raymond James analyst Andrew Marok had a Market Perform rating and no price target.

Related Link: Take Two Investors Pull Back On Q1 Earnings: Company Updates Guidance With Zynga Acquisition, Highlights 'Strong' Video Game Pipeline 

The Analyst Takeaways: Take-Two’s first quarter was its first to include results from its closed Zynga acquisition. The company reiterated $100 million in annual cost synergies within the first two years in its release.

“We reiterate our belief that the primary value unlock scenario will be for Take-Two to transition existing Rockstar/2K IP to mobile in a more meaningful way,” Credit Suisse's Ju said.

The analyst saw delays and macro uncertainty as concerns going forward.

Raymond James' Lu said macro concerns for spending and mobile games may have led to conservative guidance from the company.

“Stepping back from the print, we believe now is a great opportunity to add to positions ahead of the eventual release of GTA 6 in FY24,” Lu said.

The analyst noted shares are trading at 14x and 11x fiscal year 2023 and fiscal year 2024 estimates. This is below a historical range of 15x to 25x and comes with “the highest anticipated title set to launch in 1.5 years.”

Raymond James' Marok said the company had “decent” first-quarter results but the guidance for the rest of the year was “below expectations.”

The analyst cited engagement for console and PC games strong but mobile titles are seeing more pressure.

“Mobile is becoming more challenging as economic pressures rise, which is limiting near-term optimism,” Marok said.

Marok said the quarter didn’t provide much excitement ahead of the pending launch of “Grand Theft Auto VI.”

“If anything, the messiness of the print is likely to limit enthusiasm until core trends become more clearer.”

TTWO Price Action: Take Two shares were down 2.80% to $122 Tuesday morning at publication.


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Posted In: Analyst ColorGamingNewsPrice TargetReiterationAnalyst RatingsTrading IdeasGeneralAndrew MarokBarclaysCredit SuisseGrand Theft AutoGrand Theft Auto VIMario LuRaymond JamesStephen JuVideo Game Stocksvideo gamesZynga
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