Shares of Take-Two Interactive (TTWO) have been falling alongside almost everything else these days. The popular video-game developer behind such titles as Grand Theft Auto and Red Dead Redemption hasn’t had a lot of news to be excited about of late. The fear and dread of tech stocks, in general, have been enough to keep TTWO stock depressed.
Unlike most other video-game developers, which have triple-A releases slowly coming out of the pipeline, Take-Two is more dependent on just a few massive-budget blockbuster titles that rake in revenue for years after release.
Indeed, the stakes are higher for Take-Two, as are the periods between massive catalysts. Undoubtedly, few catalysts are more profound than the launch of anticipated blockbusters that are years in the making.
For those seeking upside, 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. Though developers are hard at work on the next iteration in the franchises, such games are subject to sizeable delays, especially amid COVID. For now, gamers and investors are in the dark when it comes to exact release dates for big releases like GTA VI.
It’s only wise for management to hold back on release dates, given the number of delays seen in the broader video-game development industry. Whenever the company is confident enough to give a release date, though, TTWO stock will surely heat up, even as markets swoon.
Until then, though, the stock won’t have many catalysts, and it’s the negative broader market news that will likely drag shares lower. On a really bad Monday for markets, TTWO stock sunk over 7% in a day, bringing the stock down around 50% from peak to trough on the back of market-wide panic.
Despite TTWO’s propensity to follow the markets lower, I remain bullish on the stock. If anything, some may be discounting the timeline and impact of the next big blockbuster in GTA VI.
Take-Two Stock: All about the Big 2?
The performances of Take-Two’s older titles have been tied to the magnitude of bonuses that Take-Two’s CEO collects.
A surprise release date reveal for GTA VI would surely give Take-Two stock a big upward spike, or at least fuel to sustain a rally towards its prior highs.
It’s been a lack of polish that has kept some big-budget games from really taking off. Fortunately, Take-Two isn’t putting the time pressure upon itself with release dates that are at high risk of being pushed out.
As Take-Two’s development team makes progress on the next big title, it’s hard to really factor in how the next GTA title will affect the value of the stock. With interest rates rising, firms with profits that lie far into the future will see their stocks take a hit.
For Take-Two, though, the next GTA title probably isn’t as far off as your average pandemic-era winner, which may never make a profit again.
Further, Take-Two has other titles to fall back on with its NBA 2K series, which should provide a nice cash cushion.
Take-Two’s Valuation Worth a Second Look
The recent sell-off seems mostly due to investor impatience, in my view. GTA (or the next Red Dead title) will arrive in due time, but it’s really hard to gauge exactly when the launch will occur.
In any case, TTWO stock looks like a better investment over a 10-year time span than a 10-month one, given the long-term improvement to the fundamentals that a blockbuster title can offer the firm.
At 5.1 times sales and 23.5 times earnings, the stock seems way too cheap for its own good.
Wall Street’s Take
According to TipRanks, TTWO stock comes in as a Moderate Buy. Out of 10 analyst ratings, there are nine Buy recommendations and one Hold recommendation.
The average Take-Two Interactive 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.
Bottom Line on TTWO Stock
Take-Two seems like a baby thrown out with the bathwater in the tech sector. Beyond GTA, there’s not much to get excited about over the next year. Given uncertainties relating to the economy, it shouldn’t be a surprise to see investors sell with the intent of asking questions later.
Take-Two is a software stock, and it’ll take a hit alongside the rest of the pack. Until the broader markets can calm down, or if news relating to GTA’s release date is revealed, expect more pain from the name.
Discover new investment ideas with data you can trust.
Read full Disclaimer & Disclosure
