Integrated into the pop-culture landscape with compelling franchises like Grand Theft Auto and Red Dead Redemption, video game publisher Take-Two Interactive (NASDAQ:TTWO) is now under fire. TTWO stock plunged in the extended session after disappointing fiscal first-quarter results on Monday. Now, shares are still struggling as management points to macroeconomic conditions and geopolitical events weighing down on the business.
For Q1, Take-Two Interactive reported a net loss of $104 million, or 76 cents per share. From a non-GAAP earnings standpoint, the company posted 71 cents per share, below the consensus estimate of 87 cents. Net bookings increased 41% on a year-over-year (YOY) basis to $1 billion. However, this tally also missed expectations; analysts had expected $1.11 billion.
Unfortunately, management just brought more bad news to the table for TTWO stock investors, too. The company says fiscal 2023 adjusted earnings per share will be between $4.60 and $4.85 per share. Analysts had estimated that figure would be $5.37 per share.
Take-Two’s acquisition of mobile-gaming outfit Zynga — completed in May 2022 — did provide a glimmer of optimism. Incorporating Zynga’s results for the first time, the company upwardly revised its fiscal 2023 net bookings outlook, guiding for between $5.8 billion and $5.9 billion. This revision beats the $5.42 billion projected by analysts.
Still, CEO Strauss Zelnick admits the company is “seeing some softness in the mobile market.” Broader economic and geopolitical headwinds don’t necessarily bode well for TTWO stock, either.
No Recession Resistance for TTWO Stock
According to Barron’s, Zelnick says that, in addition to mobile-gaming specific challenges, other pressures have negatively affected consumer sentiment. The CEO says Take-Two is “seeing the impact” and that the business is “not recession proof, or counter cyclical, or even recession resistant.” Regarding expectations for fiscal 2023, the CEO also explains:
“I would say that forecast takes a good, cold look at how the economy is now and does not bake in wildly optimistic expectations about the economy over the course of the rest of the fiscal year.”
For context, other video game companies and related equipment manufacturers — including gaming console giant Microsoft (NASDAQ:MSFT) — delivered less-than-encouraging news for the sector. Perhaps most notably, Nvidia (NASDAQ:NVDA) recently warned investors that its upcoming Q2 report will likely miss expectations. NVDA stock slipped yesterday as a result and is still 5% in the red this afternoon.
Short on good news both for Take-Two and the broader industry, many investors are now exiting TTWO stock.
From Russia With Sanctions
Perhaps surpisingly, Take-Two is also seeing some difficulty due to geopolitical conditions. Of course, Russia’s invasion of Ukraine has the deepest implications for the energy sector. But the global video game industry is also experiencing some pain. Take-Two’s CEO cited geopolitical pressures as another critical headwind.
Take-Two pulled itself out of Russia this year. However, the nation apparently has more than 70 million active gamers, with 40 million of them “keen consumers” of mobile gaming. After global sanctions, the Russian mobile games market reportedly declined by 84%.
Without much hope for a near-term solution, geopolitical events pose yet another obstacle for TTWO stock.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.