Take-Two Interactive Software Inc (NASDAQ:TTWO) reported earnings last night after the bell and … they weren’t very exciting.
As a matter of fact, TTWO sold off 6% in after-market trading, but eventually, Take-Two shares started to regain that lost ground. As of this writing, TTWO stock is up 3%! I have to say, it’s impressive to watch a stock undershoot analysts’ earnings, revenue and guidance expectations for the year fall one minute and rally the next.
What’s more, equity research firm Benchmark actually raised its target price for TTWO from $130 to $135 on the news. It’s likely other anlaysts will follow suit, but why is that?
Why TTWO Stock Is Rallying Today
Some of this has to do with where TTWO gained ground in the quarter. Its Grand Theft Auto Mobile title saw some big numbers, as did its NBA 2K18 and WWE 2K18. The move of gamers to mobile will certainly help margins since it cuts out distribution partners and suppliers.
That may be one reason for the lack of panic. Another may be that in the fourth quarter of this year, its much-anticipated launch of Red Dead Redemption 2 — as well as new NBA and WWE games — hits the market.
While TTWO stock is up more than 70% for the past 12 months, it has been treading water (up only 3%) so far this year.
Take-Two Interactive is one of the top-five gaming publishers, that much is true … but it’s not one of the major players. Electronic Arts Inc (NASDAQ:EA) is four times the size by market capitalization, and Activision Blizzard Inc (NASDAQ:ATVI) is five times larger.
What makes Take-Two unique is its focus on stories and depth. While that doesn’t resonate with all gamers, the ones it does attract are dedicated fans. Indeed, it’s why Grand Theft Auto V has 80 million players after five years and should add another 10 million this year.
One example of this focus on detail and quality is the launch of Red Dead Redemption 2. Initially, the launch was supposed to happen in Q1 or Q2 of this year. Most other video game publishers would have hit that deadline, whether the game was finished or not, patching any problems after the fact and treating it as downloadable content (DLC).
TTWO decided to move the launch date forward — upsetting Wall Street since it also influenced revenue and earnings — to early Q4, just to make sure that when it launched, it launched as the game they want it to be. It certainly takes some guts, but it has a history of paying off, and the analysts seem to agree.
Bottom Line on TTWO Stock
There’s also the fact that, by taking a hit now and lowering expectations for the rest of the year, Take-Two is well-positioned to surprise to the upside with its new launches. And if its games don’t pan out as expected, it has already covered its bases.
Either way, TTWO stock is well-managed and is a good value here.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.