Take-Two Interactive: Despite Strong Earnings Consensus Estimates Stay Flat

Take-Two Interactive (NASDAQ: TTWO) reported their fiscal fourth quarter earnings on May 18th, swiftly beating analysts’ expectations shooting up their stock price about 10% since then. The company reported revenues of $839 million, a 10.4% year over year increase. Additionally, gross margins came in at 66.7% and operating margins came in at 30.5%. The company reported a net income of $219 million, resulting in earnings per share of $1.40.

Surprisingly, the companies weighted 12-month price target has barely moved from what it was at pre-earnings. It’s currently sitting at $219.74, versus the $220.46 estimate prior. The company has 28 analysts covering the name, with six analysts having strong buy ratings, and 13 analysts have buy ratings. Eight analysts have hold ratings and one analyst has a sell rating.

In BMO’s note this week, their analyst Gerrick Johnson reiterated his $225 12-month price target and outperform rating, saying that the company has its strongest pipeline in history. Johnson believes that the company has benefitted greatly from COVID-19 as it has “accelerated trends already in motion, including the transition to digital distribution offering higher margins and the opportunity for incremental add-on sales and multi-player online services.”

Johnson remains bullish on the name, saying that their fiscal fourth quarter results illustrate that the company has “incredible strength of its core franchises,” and is encouraged that the company is taking this opportunity to build out new platforms and distribution models.

Take-Two almost doubled BMO’s $0.72 EPS, while net bookings came in about $120 million higher than their $649 million estimate.

For management’s new 2020 guidance, Johnson says that it was fairly underwhelming but says this conservative sort of guidance from management is not unusual. They are guiding for FY2022 EPS to come in at $3.75 – $4.00 on net bookings of $3.2 – $3.3 billion, which was ~13% lower than what the consensus estimate was. The company tried to play down the weak guidance by providing investors with the idea that there would be significant investments accelerated in 2022.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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