Take-Two Interactive (TTWO) stock looks like a worthy takeover target, as big tech (and other industries) set its sights on the video-gaming market.
While immersive gaming experiences have been around for decades, the barriers to entry are coming down, opening what could be a new level of high-margin growth for tech titans eager to improve their value propositions with consumers.
Subscriptions and sticky service revenue streams have been significant multiple expansion drivers. In an era where rates are rising, and real profits matter far more than just “stories,” technology companies will be eager to offer consumers more of what they want and with less of the high costs of entry standing in the way. I remain bullish on TTWO stock.
Gaming: The Next Frontier in Home Entertainment?
With all the metaverse hype and falling costs of getting in (you no longer need a pricey PC or console to really get into it these days), I’d argue that it could be even more lucrative than video streaming was back in the early days of Netflix (NFLX).
With the rise of smart TVs and dirt-cheap media devices enabling old TVs to get up to speed with the latest that streaming has to offer, there’s never been a time where Netflix hits like Squid Game have been so accessible to people across the globe.
A major impediment for most casual gamers are the hardware costs of getting into gaming. Many people cannot justify investing $2,000 on a graphics card or even $600 for a Microsoft (MSFT) Xbox Series X. Most such casual gamers are content on their mobile devices, which already offer an impressive slew of games.
Still, I think the next frontier is the wider embrace of triple-A titles that would have normally only been played by “hardcore” gamers. Could casual gaming (primarily comprised of mobile gamers today) be onramped into triple-A titles with next-generation graphics?
With the rise of game-streaming platforms (essentially consoles in the cloud) like Microsoft’s Xbox Cloud Gaming (formerly xCloud), I’d argue that they could be.
Arguably, gaming is what will entice people to try the metaverse. That’s why the value of big gaming firms may not yet be fully realized by investors, especially given all the industry consolidation we’ve witnessed of late.
Take-Two Takeover?
Back to Take-Two. It’s a likely takeover target by one of the big tech firms looking to break into the gaming world. That said, it’s likely that the stock price already reflects some chance of a takeover bid at some point in the future.
Indeed, it’s never a good idea to speculate on a stock with the assumption it’ll be acquired, as shares could crumble before an acquirer even thinks about stepping in with an offer.
What entices me about Take-Two is not that it’s just a hefty (nearly $20 billion) company that would allow a firm to break into gaming, but it’s also arguably one of the more metaverse-like gaming companies on the market these days.
Just look to the company’s big two franchises in Grand Theft Auto (GTA) and Red Dead Redemption. They offer gamers a chance to truly immerse themselves in another world.
Undoubtedly, such massive, open-world experiences would translate over well in the metaverse. Still, a truly next-gen, or metaverse-enabled version of GTA will likely take a ton of spending and many years of further development.
You see, Take-Two doesn’t just build games; it creates interactive virtual worlds, and it’s no easy feat. In the hands of a big tech company, I do think Take-Two can get deep enough pockets to build a next-generation gaming product that could truly propel the metaverse to the forefront.
Wall Street’s Take
According to TipRanks, TTWO stock comes in as a Strong Buy. Out of 14 analyst ratings, there are 12 Buy recommendations and two Hold recommendations.
The average Take-Two Interactive price target is $208.14, implying an upside of 29.2%. Analyst price targets range from a low of $170 per share to a high of $232 per share.
Bottom Line on Take-Two Stock
For now, fans are patiently awaiting the next major iteration of GTA. It probably won’t be a VR title, but it could be one of the most-played games out there.
As game-streaming picks up popularity, I’d look for Take-Two to really take its growth to the next level. As we await such blockbuster titles from Take-Two, the stock is likely to fluctuate wildly, possibly based on takeover speculation.
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