Is Take-Two Interactive Software, Inc. (TTWO) a Good Investment at This Time?

Take-Two Interactive: Recent Stock Performance and Outlook

Take-Two Interactive (TTWO) has recently attracted significant attention from investors, making it a popular topic among market watchers. Let's explore the factors that could influence the company's short-term stock movement.

Recent Stock Movement

Over the past month, Take-Two Interactive, known for publishing titles like "Grand Theft Auto," saw its share price decline by 14.8%. In comparison, the Zacks S&P 500 composite index slipped just 0.3%, while the Zacks Gaming industry group, which includes Take-Two, dropped 9.4%. This raises the question: what might be next for TTWO?

What Drives Stock Trends?

While news headlines or speculation about major business changes can cause a stock to trend and move sharply in the short term, long-term investors often focus on fundamental factors when making decisions.

Earnings Forecast Revisions

At Zacks, changes in analysts’ earnings projections are a primary focus, as these revisions often have a strong impact on a stock’s fair value. When analysts raise their earnings estimates, the stock’s perceived value increases, which can attract buyers and push the price higher. Research has shown a close link between earnings estimate trends and short-term stock price movements.

• Current Quarter: Take-Two is projected to report earnings of $0.55 per share, a decrease of 49.5% compared to the same quarter last year. However, the consensus estimate has surged by 1328.6% in the past month.
• Current Fiscal Year: The consensus estimate stands at $3.86 per share, up 88.3% from the previous year, with a 34.6% increase in the last 30 days.
• Next Fiscal Year: Analysts expect $8.11 per share, a 110.1% rise from the prior year’s expected results, and this estimate has edged up 1.3% over the past month.

Zacks’ proprietary ranking system, which incorporates earnings estimate revisions and other factors, currently assigns Take-Two a Rank #3 (Hold), suggesting a neutral outlook for the near term.

Forward 12-Month EPS Trend

The following chart illustrates the changes in Take-Two’s forward 12-month consensus EPS estimate:

Revenue Outlook

While earnings growth is a key indicator of financial strength, sustained profit increases are difficult without revenue expansion. Understanding Take-Two’s sales potential is therefore important.

• Current Quarter: Analysts expect sales of $1.55 billion, a 1.9% decrease year-over-year.
• Current Fiscal Year: Projected revenue is $6.67 billion, up 18.2% from the prior year.
• Next Fiscal Year: Forecasted revenue is $9.16 billion, representing a 37.3% increase.

Recent Results and Earnings Surprises

In the most recent quarter, Take-Two reported revenue of $1.76 billion, a 27.9% increase from the previous year. Earnings per share reached $1.23, compared to $0.72 a year earlier. These results exceeded analyst expectations, with revenue beating estimates by 10.95% and EPS surpassing forecasts by 48.19%. Notably, Take-Two has outperformed consensus estimates for both revenue and earnings in each of the last four quarters.

Valuation Analysis

Evaluating a stock’s valuation is essential for making informed investment decisions. Comparing current valuation metrics like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) to historical averages and industry peers helps determine if a stock is fairly valued, overvalued, or undervalued.

Zacks’ Value Style Score, which grades stocks from A to F based on various valuation measures, currently assigns Take-Two a D, indicating the stock trades at a premium compared to its industry peers.

Summary

The information above, along with additional resources on Zacks.com, can help investors decide whether to pay attention to the current buzz around Take-Two. However, with a Zacks Rank #3, the stock is expected to perform similarly to the broader market in the near future.