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Is Take-Two Interactive Software a buy?

It’s time to breakdown a popular video game name. Here is the breakdown on $TTWO, otherwise known as Take Two Interactive Software.

Current Price: $186.99

52/Wk High: $214.91

52/Wk Low: $100.00

Market Cap: $21.4 Billion

Read below for the breakdown!

Take-Two Interactive Software is one of the most prominent entertainment and digital gaming companies in the market, boasting the ownership of major franchises such as Rockstar Games and 2k.

Due to COVID-19 the video game world has seen huge acceleration and Take-Two continues to improve the pipeline with years of growth to come, with 93 titles to be released by the year 2025.

Given the companies already accelerated growth, it is only right to dig into the last reported quarter.

Digging into the most recent numbers, Take-Two delivered a Q3 beat with an EPS of $1.25, better than the analysts consensus estimate of $0.96. On a year over year basis EPS declined -23.31%.

As for revenues, Take-Two delivered $860.90 million in GAAP revenues, representing a decline from the Q3 2020 GAAP revenues level of $930.1 million.

On a positive note, recurrent consumer spending increased by an impressive 57% and accounted for 62% of total revenues throughout Q3.

As for provided cash, operating activities provided a GAAP net cash level of $787.7 million, representing a strong 79% increase in cash provided by operating activities in the nine-months ended December 31st.

Net bookings were also solid, totaling $814.3 million for the quarter along with solid growth in net income to $182.2 million representing an increase of 11% in income.

Digging further into net bookings, $814.2 million represents a decline from the previous same time 2020 level of $888.2 million.

On the other hand, net bookings from recurrent consumer spending increased by 30% and represented 58% of total net bookings.

Management was upbeat about the quarter.

“Take-Two is exceedingly well-positioned to capitalize further on the positive trends of our industry and to pursue our core mission to become the most innovative, creative, and efficient entertainment company in the world,” management noted.

Leadership is bullish on the future as well, raising full year guidance and delivering strong Q4 and FY 2021 guidance.

Taking a look at Q4, management is expecting Q4 net revenues to total $702 million to $752 million along with a net income within a range of $102 million to $113 million.

Net bookings in Q4 are also expected to land in line with previous guidance within a range of $602 million to $652 million.

Shifting into FY 2021 guidance, management is expecting net revenues to land within a range of $3.235 billion to $3.285 billion along with a net income of $472 million to $484 million.

Net bookings for the full year are also expected to be strong, with management expecting FY 2021 net bookings to total $3.37 billion to $3.42 billion.

Shifting into the balance sheet, the numbers are solid.

Total Debt: None

Total Liabilities: $2.811 Billion

Total Assets: $5.966 Billion

Cash & Short Term Inv: $2.423 Billion

On a valuation basis, Take-Two does trade at a premium.

Price to Earnings: 43.53x

Forward Price to Earnings: 30.25x

Price to Sales: 6.55x

Price to Book: 6.78x

Price to Cash Flow: 23.90x

Management has done a solid job as well.

Return on Equity: 17.74%

Return on Assets: 9.09%

Return on Invested Capital: 15.38%

Given the numbers the analysts are bullish with a mean price target of $224.47/share, representing a 20.72% gain.

It is also important to note that the high price target is $250.00/share, representing a 34.44% upside, while the low price target is $204.00/share, representing a 9.71% gain.

The big money is also quite involved with 93.17% of Take-Two being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.

On a technical basis Take-Two has been bullish but is in the midst of a pullback. According to the six-month charts the MACD recently crossed back to the downside within a range of -0.8996 down to -2.8148.

The six-month charts are also indicating an RSI of 37.33 and CCI 0f -169.8135, both of which are on the low end.

In short, Take-Two Interactive Software is a solid long term investment given a growing video game market, excellent pipeline, and a strong consumer base.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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