Take-Two stock sinks as earnings top estimates, but forecast falls short

·Technology Editor
·2-min read
Take-Two Interactive's 'Grand Theft Auto Online' has been a cash cow for the company. (Image: Take-Two)
Take-Two Interactive's 'Grand Theft Auto Online' has been a cash cow for the company. (Image: Take-Two)

Video game giant Take-Two Interactive (TTWO) reported its fiscal Q1 2022 earnings after the closing bell on Monday, beating analysts' estimates for the quarter, but falling short in its Q2 2022 guidance.

Here are the most important numbers from the quarter compared to what Wall Street was expecting.

  • Revenue: $711 million versus $684 million expected.

  • Earnings per share: $1.01 versus $0.90 expected.

For Q2 2022, Take-Two is forecasting revenue of between $815 million to $865 million, falling short of Wall Street's estimate of $868 million. The stock was down more than 3% on the news.

Take-Two has been leaning heavily on its mainstay titles like “Grand Theft Auto V,” “Grand Theft Auto Online,” “Red Dead Redemption 2,” and its “NBA 2K” franchise to power its sales in last few quarters, but analysts are growing wary of the continued strength of those games going forward.

“We have seen investor sentiment turning negative on [Take-Two] in recent months,” Oppenheimer analyst Martin Yang wrote in a research report ahead of the video game maker’s earnings release.

“The stock has underperformed this year (down 18% [year-to-date] vs NASDAQ's 15% gain). While most investors understand and appreciate the longevity of the [“Grand Theft Auto”] franchise and the live service strength in “NBA 2K,” [Take-Two’s] overall story is turning more difficult to tell,” Yang added.

The gaming industry exploded during the pandemic, as people around the world found themselves looking for any outlet while they were stuck in their homes. The gaming sector itself is now worth $300 billion, more than both the music and movie industries combined, according to Accenture.

But the availability of vaccines combined with re-openings means that comparisons between Take-Two’s fiscal 2021 and fiscal 2022 will be especially tough to swallow.

For the quarter, revenue, or net-bookings, were down a whopping 29% year-over-year, falling from $996.2 million in Q1 2021 to $711 million in Q1 2022.

Still, the company is expected to roll out a number of new titles in the coming months including versions of “Grand Theft Auto V” for Sony's (SONY) PlayStation 5 and Microsoft's (MSFT) Xbox Series X, and has said that it has 62 games coming between fiscal 2022 and fiscal 2024. So while there may be some headwinds in the near term, the company may be able to flip the switch in short order.

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