Take-Two Stock: Don’t Underestimate Its Potential
Actions of Take-Two Interactive (TWO) have dropped alongside just about everything else these days. The famed video game developer behind titles like Grand Theft Auto and Red Dead Redemption hasn’t had much news to cheer about lately. The fear and dread of tech stocks, in general, was enough to keep TTWO stock depressed.
Unlike most other video game developers, whose triple-A releases slowly roll out of the pipeline, Take-Two is more reliant on a few big-budget hit titles that generate revenue for years after release.
Indeed, the stakes are higher for Take-Two, as are the periods between massive catalysts. Undoubtedly, few catalysts run deeper than the launch of anticipated blockbusters that have been in the works for years.
For those looking for the edge, it’s all about Take-Two’s big two.
They have the potential to become game-changing titles (pardon the pun) and profit drivers for many years after release. Although the developers are hard at work on the next iteration of the franchises, these games are subject to significant delays, especially in the midst of COVID. As of now, gamers and investors don’t know the exact release dates for big releases like GTA VI.
It’s wise for management to hold back on release dates, given the number of delays seen in the wider video game development industry. However, whenever the company is confident enough to give a release date, TTWO stock will surely heat up, even if the markets are sagging.
Until then, however, the stock won’t have many catalysts, and it’s the negative news from the broader market that’s likely to drive the stock lower. On a very bad Monday for the markets, TTWO stock fell more than 7% in one day, causing the stock to fall about 50% from top to bottom due to panic across the world. market.
Despite TTWO’s propensity to follow the markets down, I remain bullish on the stock. If anything, some may overlook the timeline and impact of GTA VI’s next big blockbuster.
Take-Two Stock: all about the Big 2?
The performance of past Take-Two titles has been linked to the magnitude of the bonuses the CEO of Take-Two collects.
A surprise reveal of the GTA VI release date would surely give Take-Two stock a big boost, or at least fuel to sustain a rally back to its previous highs.
It’s a lack of polish that’s kept some big-budget games from really taking off. Fortunately, Take-Two does not put time pressure on itself with release dates which are likely to be postponed.
As the Take-Two dev team progresses on the next big title, it’s hard to really consider how the next GTA title will affect stock value. With rising interest rates, companies with earnings far into the future will see their stocks suffer.
For Take-Two, however, the next GTA title probably isn’t as far off as your average pandemic-era winner, who may never turn a profit again.
Additionally, Take-Two has other titles to fall back on with its NBA 2K series, which should provide a nice cushion of cash.
Take-Two’s rating deserves a second look
The recent selloff seems mostly due to investor impatience, in my opinion. GTA (or the next Red Dead title) will arrive in due course, but it’s really hard to know exactly when the launch will be.
Either way, TTWO stock looks like a better investment over a 10-year period than over a 10-month period, given the long-term improvement in fundamentals that a successful stock can offer the company.
At 5.1 times sales and 23.5 times earnings, the stock looks far too cheap for its own good.
The Taking of Wall Street
According to TipRanks, TTWO stock is a Moderate Buy. Out of 10 analyst ratings, there are nine buy recommendations and one hold recommendation.
Take-Two Interactive’s average price target is $202.80, implying 95.8% upside potential. Analyst price targets range from a low of $173 per share to a high of $231 per share.
Conclusion on TTWO shares
Take-Two looks like a baby thrown out with the bathwater in the tech industry. Beyond GTA, there isn’t much to look forward to in the next year. Given the uncertainties in the economy, it should come as no surprise to see investors selling with the intention of asking questions later.
Take-Two is software stock, and it’ll take a hit alongside the rest of the pack. Until the broader markets can calm down, or news regarding GTA’s release date comes to light, expect more pain from the name.
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