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Analyst Roundup: Take-Two Jumps After Strong Q1 Beat, Record Engagement

Dave Royse

Take-Two Interactive Software, Inc (NASDAQ: TTWO) stock was soaring Tuesday as analysts boosted price estimates in the wake of another big earnings beat and guidance that suggests the company thinks more wins are coming.

The company reported higher net bookings and EPS 23 cents above the Street estimate on Monday, mostly on the strength of better-than-expected performances from "Grand Theft Auto Online" and "NBA 2K."

The Analysts

MKM Partners’ Eric Handler reiterated a Buy rating and raised the price target from $136 to $142.

Wedbush analyst Michael Pachter reiterated an Outperform rating and raised the target price from $134 to $144.

Barclays analyst Deepak Mathivanan reiterated an Overweight rating with a $124 price target.

BMO Capital Markets' Gerrick Johnson maintained at Market Perform with a $110 target price.

KeyBanc Capital Markets analyst Tyler Parker maintained an Overweight rating and boosted the price target from $145 to $150.

The Takeaways

Take-Two easily beat the Street's above-guidance forecast in the first quarter on strong recurrent consumer spending, mainly from "Grand Theft Auto Online" and "NBA 2K."

Several analysts said that even with higher expectations, there’s more room for upside for investors.

“We continue to view Take-Two as our Top Idea for 2019 and believe even while FY20 EPS guidance moved higher than expected there remains additional room for upside as the year progresses,” MKM’s Handler wrote in a note.

Barclays’ Mathivanan and Wedbush’s Pachter were similarly upbeat about the chances that Take-Two will beat even the more bullish expectations.

“Although the stock is trading at the upper end of its valuation range at 23x FY21E EPS, we see further upside to estimates ahead,” Mathivanan said.

View more earnings on TTWO

Pachter said Take-Two "has consistently delivered upside to guidance and consensus, making its shares attractive over the near term."

'NBA2K,' 'GTA'

Mathivanan said "NBA 2K" rebounded, with a record 12 million units sold, and its RCS accelerated for a second straight quarter to 140% year-over-year.

"GTA Online" also showed continued strength and had a record update with its "Diamond Casino" release in July, which Mathivanan said had the highest level of user engagement since the game’s launch.

Upcoming Releases

Take-Two’s strength seems to be in driving engagement years beyond the hype of a new release, and it appears to be something it can do across franchises, said KeyBanc’s Parker.

"NBA 2K" and "GTA" continue to see growth despite being years old, the analyst said.

"This reinforces our thesis that TTWO is among the best at driving ongoing engagement and therefore RCS, which bodes well for both ‘Red Dead Online’ and the upcoming ‘Borderlands 3’ release in F2Q."

Safe Haven?

The economy could drive the stock higher, said BMO's Johnson.

“With the threat of an economic downturn we believe video game stocks will be increasingly seen as safe havens for investors,” the analyst said in a note.

“Though we still have concerns about fundamental performance, TTWO has a robust pipeline and remains a perceived target for acquisition, which could also keep its current multiple elevated.”

Price Action

Take-Two shares were trading higher by 9.74% at $126.62 at time of publication Tuesday. 

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Screenshot courtesy of Rockstar Games.

Latest Ratings for TTWO

Date Firm Action From To
Aug 2019 Maintains Overweight
Aug 2019 Maintains Neutral
Aug 2019 Maintains Buy

View More Analyst Ratings for TTWO
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