Take-Two Interactive Software, Inc (NASDAQ:TTWO) is set to release earnings next week. Investors are feeling confident heading into that earnings report. The price of Take-Two Interactive stock is up from as low as $95 last month to $116 today.

And investors have good reason for excitement. Analysts see Take-Two tripling its earnings over the next 12 months. Pretty impressive. The launch of a blockbuster sequel this October could propel Take-Two Interactive stock to new highs. But while the bull case is attractive, there are some concerns that Take-Two shareholders should be aware of heading into earnings.

Take-Two Interactive Stock Price Cons

Rising Competition: All three major video game stocks have dramatically outperformed the S&P 500 in recent years. In fact, all three would have proven to be doubles if bought a couple years ago. Activision Blizzard, Inc. (NASDAQ:ATVI), for example, is up from $20 in early 2015 to $72 now.

In a capitalist society, it’s hard for all the major players in an industry to keep on winning. Inevitably you’ll see new entrants to the field producing their own games, dividing consumer attention. There isn’t much of a moat to this sort of business. Sure, proprietary characters and universes help to some extent. But ultimately, there’s not much to stop other game developers from seeing the industry’s excessive profits and try to take a slice of it for themselves.

Expensive Stock: The price of Take-Two Interactive stock is vulnerable to over-valuation. Heading into earnings, TTWO stock is selling at 69x trailing earnings. Analysts see earnings tripling this year, bringing the forward price-to-earnings ratio down to 23x.

Take that with a grain of salt though. Much of those future earnings are reliant on Red Dead Redemption 2 coming out this year and being a blockbuster seller. Given that it’s already been delayed twice, don’t take that October projected release date to the bank. And, video games, more than just about anything, are vulnerable to negative reviews and changes in consumer preferences. A sequel isn’t guaranteed to deliver on expectations.

Even supposing that Take-Two manages to triple its earnings over the next 12 months, it still looks expensive at 23x. This industry is so hit-driven, and competition is rising so quickly, that it’s hard to accept a less than 5% earnings yield from a business like this.

Insider Selling: Take-Two insiders are heavily selling TTWO stock. To be fair, the company pays its executives small salaries, compensating them largely with stock.

That said, the volumes of stock sales here are dramatic. In April alone, company president Karl Slatoff and CEO Strauss Zelnick combined to sell more than 400,000 shares of Take-Two stock. That stake was worth more than $40 million. Over the past year, according to Finviz data, insiders have sold stock on 19 separate occasions, against zero insider purchases. Insider selling doesn’t necessarily mean a stock is overpriced, but it’s worth watching at this level of size and consistency.

Take-Two Interactive Stock Price Pros

Red Dead Redemption 2 Should Be Huge: The original Red Dead Redemption sold at least 13 million copies. And it probably could have sold quite a few more if Rockstar had released a proper PC version of the game. Additionally, RDR’s incredible sales came despite launching with only a tiny fan base.

Now, the sequel will be aided by a massive engaged community and tons of hype. While the delays in releasing the sequel have slowed down the ascent in the price of Take-Two Interactive stock, that extra time is giving the company the ability to make sure the sequel launches as strongly as possible. Also, coming out in October, it will be at the height of its buzz during the key holiday shopping season.

Grand Theft Auto Is the King: In a field where competition is rapidly rising, having the best franchise is an all-important asset. Even five years now after release, GTA V continues to be a best-seller. The game’s online mode still flourishes after all this time, bringing in the ever-popular-with-investors microtransaction revenues.

GTA V is the best-selling video game of all time, fastest entertainment property to $1 billion in revenues, and holds many other such records. So, for now, Take-Two can keep profiting off its record-winning game. And whenever Take-Two does release Grand Theft Auto VI, it will likely result in a record-breaking earnings-per-share figure for the company in that fiscal year.

Broadening Revenue Streams: Those bearish on the price of Take-Two Interactive stock will say the company is reliant on just a couple of hits. If, for some reason, GTA VI bombed, TTWO stock would collapse. Even a miss from this year’s RDR sequel would be pretty hard to stomach for shareholders.

That said, the company is doing better at building out other revenue streams. Online microtransactions are great for Take-Two. They are high profit-margin business that greatly extends the revenue-generating potential of older titles. Video games are moving past just earning income when you initially sell them, making the business much safer. Take-Two has also done an admirable job of creating valuable new series, including Bioshock and Borderlands.

Verdict on Take-Two Interactive Stock

Take-Two’s management has done a great job in recent years. Its Rockstar imprint has exceeded all expectations with the monetization of the Grand Theft Auto series. And Take-Two’s newer pieces of intellectual property are also paying off well.

But the market has fully reflected this in the TTWO stock price. The stock is up 20% just over the past month. And it’s way up from where it traded in previous years. For a hit-driven company like Take-Two, it’s dangerous to buy near the highs. I’d rather wait for a potential sell-off on next week’s earnings report to try to take a position in the stock.

At the time of this writing, the author held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.