As with all video game stocks, console game publisher Take-Two Interactive (NASDAQ:TTWO) has been dragged down recently amid renewed stock market volatility. Over the past few weeks, while the S&P 500 has dropped nearly 10% off recent highs, TTWO stock has dropped nearly 20% off recent highs.

But, the things dragging down the market (higher interest rates and tariffs) don’t have that much of an impact on TTWO stock. Meanwhile, the long-term fundamentals underlying the video game industry remain strong, especially in the U.S. where Take-Two has the most exposure. And, Take-Two just released arguably its most highly anticipated title in years with Red Dead Redemption 2 against the backdrop of a red-hot consumer in America.

Overall, the fundamentals supporting TTWO stock remain favorable. As such, recent weakness is an opportunity.

Take-Two stock may not bounce back right away. Usually, deep 20% corrections take time to reverse. But, over the next several weeks as strong holiday numbers roll in for Red Dead Redemption 2, TTWO stock should gradually crawl its way back to peak levels.

Take-Two Is Protected From Macro Risks

Right now, there are three big risks that are weighing on high-growth stocks like TTWO. Those risks are forthcoming tariffs, higher interest rates and a China economic slowdown. TTWO stock is well insulated from all three.

Take-Two is a video game publisher that makes software content. Unless present trade relations deteriorate significantly, Take-Two’s financials won’t be materially impacted by tariffs.

Meanwhile, higher rates are pressuring equities by dragging down sky-high valuations and pushing up debt costs. But, TTWO stock isn’t all that richly valued, and there is hardly any debt on the balance sheet. TTWO stock trades in line with other video game stocks (20X to 25X forward earnings) and at a discount to its historically normal valuation (29X forward earnings), so over-valuation isn’t a red flag here. Meanwhile, Take-Two has just $5 million in long-term debt sitting on its balance sheet, against a cash balance in excess of $1 billion. By comparison, Electronic Arts (NASDAQ:EA) has nearly $1 billion in long-term debt, while Activision (NASDAQ:ATVI) has over $4 billion.

Thus, higher rates don’t really add much pressure to TTWO’s already depressed valuation. They also won’t hurt earnings power through higher debt costs because TTWO essentially has no debt.

With respect to the slowdown in China, video game stocks have been hit especially hard because Beijing has frozen game approvals for the past several months. But, Take-Two hardly gets any revenue from China. About 6% of TTWO’s revenues were from the entire Asia Pacific region last year. Presumably, China accounted for most, but not all, of Asia Pacific revenues. Thus, TTWO’s China exposure is, at best, 5% of revenues. That is minimal.

Overall, TTWO stock is well insulated from macro equity risks that have weighed on growth stocks for the past several months. That is why TTWO stock is just 18% off recent highs. Peers EA and ATVI are both well into bear market territory. Going forward, this dynamic should persist, and TTWO stock should outperform its growth peers.

Long-Term Fundamentals Remain Favorable

Outperformance is nice. But, more than that, TTWO stock should head higher from here. The fundamentals in the video game industry provide support for a rally in Take-Two stock. Video game engagement is at peak levels and has been on a multi-year uptrend. Meanwhile, the digital shift and micro-transactions narratives still have more runway to power revenues and margins higher (video game spend as a percent of the male teenager wallet continues to rise, while physical retail still accounted for nearly 40% of TTWO revenues last year).

Importantly, eSports is just starting to go mainstream. We are finally starting to see eSports leagues like Overwatch League and ePremier League gain mainstream traction, while eSports advertisements are now airing frequently on ESPN during live sporting events like NBA games.

Overall, video game industry fundamentals remain strong. Take-Two is a leader in the video game industry. Naturally, strong video game fundamentals translate into strong fundamentals for TTWO stock.

Specific to TTWO, you have Red Dead Redemption 2, which promises to be one of this company’s biggest video game releases ever. Early reviews are glowing, and according to Metacritic, this installment is as discussed in the video game community as the first installment. RDR2 released just a few days ago. That means that over the next few weeks, holiday sales numbers for this title will start to trickle in. But already, RDR2 has become the “biggest entertainment opening weekend of all time” and TTWO stock is soaring.

Altogether, there are many reasons to like TTWO stock here. Take-Two is well-insulated from macro equity risks due to an already depressed valuation, non-existent debt levels and minimal China exposure. Meanwhile, the long-term fundamentals supporting TTWO stock remain strong, and you have a very unique and huge catalyst that could provide a meaningful lift into the end of the year.

Put all that together and I think TTWO stock is a buy on this dip.

Bottom Line on TTWO Stock

TTWO stock is well insulated from macro equity risks, has strong long-term growth fundamentals and is 20% off recent highs ahead of a huge catalyst. There’s a lot to like about this stock here and now. Near-term noise may persist. But, in the medium to long-term, TTWO stock will ultimately head higher.

As of this writing, Luke Lango was long TTWO and EA.