Take Two Interactive Software Inc (NASDAQ:TTWO) seems to have it all now and for the foreseeable future, per Wall Street. But with the Take Two story looking that good off and on the price chart, a limited-risk bullish combination spread in lieu of TTWO stock is seen as the game-winning strategy. Let me explain.
Judging by TTWO stock’s latest earnings report last week and glowing reviews in its aftermath, it appears the video game publisher can do no wrong. In fact, after the company’s massive profit beat shares of Take Two were sent soaring higher by more than 10% to record highs.
As well, bulls are likely to add strong guidance through next year and double-digit growth driven by Take Two’s “best-in-breed” digital revenues have allowed the company to smooth out and monetize its hit game franchises better than ever.
So what more could a bull want from Take Two?
According to the latest market call and TTWO news, the answer is not a lot. On Monday, BMO Capital Markets reiterated its “outperform” rating while lifting the price target on TTWO stock from $125 to $135 based on the aforementioned factors.
Throw in supportive industry tailwinds and an equally sympathetic chart, the story for TTWO seems to only get stronger. And therein lies the rub for this strategist.
TTWO Stock Weekly Stock Chart
The problem for TTWO stock without declaring it’s an Atari-style “game over” situation for bulls is the enthusiastic narrative isn’t entirely new. More concerning, the price action now puts shares at increased risk of a larger technical correction.
Admittedly, my interpretation of TTWO isn’t a popular view. But with shares having gone up unobstructed for more than 200% gains over the last year and change — and recently racking up gains of about 50% from a late-stage cup-style base breakout –the overly bullish price action leaves Take Two stock extended and prone to a larger corrective base count reset before, and if, moving meaningfully higher.