Take-Two Interactive (TTWO): Three factors bode well for the game company

Shares of Take-Two Interactive Software Inc. (NASDAQ: TTWO) rose more than 1% on Monday. The stock has fallen 13% since the start of the year and 16% over the past 12 months. Despite the decline, there is a bullish sentiment around the stock thanks to the investments it is making and the expected growth in the industry. Here are three factors that bode well for the company:

Solid portfolio

The company has a strong portfolio of games that remain popular with its users. Titles like Grand Theft Auto, Red Dead Redemption, and NBA 2K continue to drive engagement and attract new users. Grand Theft Auto V continues to generate strong sales and since its launch has remained among the top five selling titles in major markets. When announcing its third quarter 2022 results, Take-Two said Grand Theft Auto V had sold over 160 million units worldwide.

NBA 2K22 exceeded company expectations with over 8 million units sold worldwide. In the third quarter, the average number of users playing the game each day increased by 10% compared to NBA 2K21 at the same time last year. NBA 2K22 saw an 8% increase in total in-game buyers and a 30% increase in new franchise buyers. Red Dead Redemption 2 also performed well selling nearly 43 million units worldwide in the third quarter.

The strength of these titles contributed to 5% revenue growth and a 6% increase in net bookings during the third quarter. Although the strong momentum seen during the pandemic is beginning to fade as people return to their pre-pandemic activities, there are still opportunities for growth with the launch of new offerings such as OlliOlli World and The wonders of Tiny Tina.

Acquisition of Zynga

Another growth driver for the company is Take-Two’s acquisition of Zynga, which is expected to close in the first quarter of fiscal 2023. This transaction will help Take-Two diversify its business and expand its position in the interactive entertainment industry. By introducing titles such as FarmCity, Toon Blast, Toy Blast and golf rival from Zynga, Take-Two can establish a strong position in the rapidly growing mobile gaming space.

Take-Two has identified $100 million in annual cost synergies it expects to achieve in the first two years after closing the deal and more than $500 million in annual revenue opportunities that can be generated over time.

Growth in the industry

According to data from IDG Consulting, the global video game market was worth $233 billion in 2021. This figure is expected to reach $253 billion in 2022 and $286 billion in 2025. This would reflect a rate of compound annual growth of 5%.

Click here to read the transcript of Take-Two Interactive’s Third Quarter 2022 Earnings Conference Call