Take-Two Interactive (NASDAQ:TTWO) shares fell after footage from its latest Grand Theft Auto video game leaked. TTWO stock, which opened Sept. 16 near $130, is now trading at about $120 per share. The company’s market capitalization is $20.7 billion on expected fiscal 2023 revenue of $5.78 billion.
In August, Take-Two reported what it called “strong earnings” for the June quarter. But it also expects a loss for the current quarter on $1.4 billion in revenue. The company lost $104 million, or 76 cents per share, during the June quarter while handing out $92 million in employee stock awards.
It’s in the Game
Part of a test build from Grand Theft Auto VI was posted to an online forum by a hacker who said they also attacked Uber (NYSE:UBER). The hacker gained access through the Slack account of an employee.
The game, from Take-Two’s Rockstar Games unit, is important not just for Take-Two, but the whole games sector amid fears of falling discretionary income and a possible recession.
Take-Two shares began the year at $181 per share and are now down by more than one-third on the year. TTWO stock has been hurt by its $12.7 billion acquisition of Zynga, known for the online game Farmville. Insiders have been selling the stock.
Even with the anticipated fall in the stock price, Take-Two still sells for more than three times its annual revenue. The company is generally able to report 10% of revenue as net income, but may have overpaid for Zynga. When the two companies announced the acquisition in January, they reported combined trailing year revenue of $6.1 billion. Take-Two now estimates 2023 revenue will be more than $300 million short of that, with a likely loss of more than $400 million.
What Happens Now for TTWO Stock
The Zynga purchase hurt Take-Two a lot more than the hack. But the hack illustrates just how overvalued game stocks may be in the present market. Losses from the Zynga combination could not have come along at a worse time. Neither could the Grand Theft Auto VI leak. TTWO stock is likely headed lower.
On the date of publication, Dana Blankenhorn held a long position in CRM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
