“Grand Theft Auto” fans may be searching for any mention of the sixth official installment of the franchise in Take-Two Interactive Software Inc. earnings, but some investors may focus on any bump from mobile ads given results from ad-monetization software companies last week.
Take-Two TTWO,
Wedbush analyst Nick McKay, who has an outperform rating and a $130 price target, said in a note Monday he expects Take-Two’s fiscal 2024 forecast to come in below the Street consensus, while posting an in-line fourth quarter “with improving sentiment offset by Zynga softness.”
Analysts surveyed by FactSet estimate expect an unadjusted loss of $1.22 a share on revenue of $1.35 billion and net bookings of $1.34 billion. Take-Two had forecast a loss of $1.27 to $1.17 a share on revenue of $1.34 billion to $1.39 billion, and net bookings of $1.31 billion to $1.36 billion.
For the first quarter, analysts expect an unadjusted loss of 19 cents a share on revenue $1.42 billion and net bookings of $1.29 billion. For fiscal 2024, the Street estimates an unadjusted loss of $1.45 a share on revenue of $6.1 billion and net bookings of $6.11 billion.
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Soft ad spending was expected this earnings season, but then, last week, both Unity Software Inc. U,
Those results caused AppLovin shares to more than double year to date, and brought Unity’s into a year-to-date gain, and a Wednesday upgrade to AppLovin shares from B of A Securities kept the rally running. Take-Two shares are already up 20% on the year. In comparison, the S&P 500 index SPX,
Also Electronic Arts Inc. EA,
McKay said he expects Take-Two to guide revenue to around $5.6 billion for the year “and unless management confirms a big Rockstar title in the foreseeable future, we expect Take-Two shares to come under pressure.”
On the other hand, a “sluggish” guide might “allow the Bulls to dream about a much better” 2025, if 2024 features “no Rockstar title or other major AAA release, many will assume that [fiscal 2025] is packed with releases from the 87-game slate,” the Wedbush analyst said.
If Take-Two frames the narrative around fiscal 2025’s potential with Zynga rather than a fiscal 2024 “letdown,” McKay said, that additional color “could be perceived to leave the door open for Grand Theft Auto VI in [fiscal 2025], although a [fiscal 2026] or later launch seems more likely to us.”
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Back in February 2022, Rockstar Games confirmed in a statement “that active development for the next entry in the ‘Grand Theft Auto’ series is well under way.”
Jefferies analyst Andrew Uerkwitz, who has a buy rating on Take-Two and a $165 target price, said he hopes to get more color on the pipeline, and that “the best time to own videogame stocks” is when publishers are about to exit their peak investment cycle, and start their release cycle.
“We believe investors will be looking for the updated quantification of the pipeline that we get annually to attempt to discern the launch cadence for immersive core titles,” Uerkwitz said in a recent note. The analyst expects core Take-Two titles to show a decline on a year-to-year basis, “as we await the pipeline unlock.”
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“In mobile, we expect to hear updates on [direct-to-consumer] efforts and new title launches (it’s been over 12 months since Zynga has launched a non-hypercasual title),” Uerkwitz said. “We do expect advertising weakness in mobile to persist for several quarters.”
Also, on Monday, Microsoft Corp. MSFT,
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