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Take Two (TTWO) to Report Q2 Earnings: What's in the Cards?

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Zacks Equity Research
·5 min read
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Take Two Interactive TTWO is set to report second-quarter fiscal 2021 results on Nov 5.

For the quarter, the company expects GAAP net revenues between $750 million and $800 million and GAAP earnings between 85 cents and 96 cents per share.

The Zacks Consensus Estimate for fiscal second-quarter earnings has improved 0.7% to $1.45 per share over the past 30 days.

The consensus mark for revenues is pegged at $843.1 million, indicating a decline of 11.3% from the year-ago quarter.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, resulting in an earnings surprise of 42.1%, on average.

TakeTwo Interactive Software, Inc. Price and EPS Surprise

TakeTwo Interactive Software, Inc. Price and EPS Surprise
TakeTwo Interactive Software, Inc. Price and EPS Surprise

TakeTwo Interactive Software, Inc. price-eps-surprise | TakeTwo Interactive Software, Inc. Quote

Will Portfolio Strength Aid the Top Line?

Take Two is expected to have benefited from the popularity of its franchises — Borderlands, Grand Theft Auto (GTA), Red Dead Redemption and NBA.

Additionally, coronavirus-led lockdown is expected to have been a major growth driver in increasing the number of active users in the to-be-reported quarter.

Notably, worldwide release of games and updates in the fiscal second quarter, including the release of PGA TOUR 2K21, NBA 2K21, The Outer Worlds: Peril on Gorgon expansion pack, WWE 2K Battlegrounds and Mafia: Definitive Edition are expected to have boosted active user growth and contributed to the company’s top line.

Moreover, Grand Theft Auto Online and Grand Theft Auto V and NBA 2K20, Red Dead Redemption 2 and Red Dead Online and Borderlands 3 are expected to have been the largest contributors to net bookings in the to-be-reported quarter.

The company expects net bookings between $775 million and $825 million in the fiscal second quarter.

Take Two’s continued support for both Red Dead Online and Grand Theft Auto Online, with new features and updates, are expected to have enhanced user engagement and player growth.

Moreover, this Zacks Rank #3 (Hold) company expects digitally delivered net bookings to be flat year over year, driven by growth in recurrent consumer spending, offset by lower digitally delivered sales of Borderlands 3, which was launched last year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company assumes that 63% of current generation console games will be delivered digitally, up from 51% in the same period last year.

Private division’s Ancestors: The Humankind Odyssey is likely to have contributed to digitally delivered net bookings in the soon-to- be-reported quarter.

Other Factors at Play

Moreover, strong video game spending in the quarter bodes well for Take-Two. Per Venturebeat, which cited NPD data, the U.S. video game sales in July, August and September increased 32%, 37% and 10%, respectively.

Further, the company is expected to have benefited from growth in recurrent consumer spending (virtual currency, add-on content and in-game purchases, including the allocated value of virtual currency and add-on content incorporated in special editions of certain games).

Notably, for the fiscal second quarter, Take-Two expects recurrent consumer spending to grow approximately 10% year over year driven primarily by growth in Grand Theft Auto Online and NBA 2K20.

Additionally, Civilization VI Expansion Bundle, WWE SuperCard limited edition cards and Kerbal Space Program Enhanced Edition: Breaking Ground expansion pack are anticipated to have attracted players, driving recurrent consumer spending for the to-be-reported quarter.

However, the company faces stiff competition from the likes of Electronic Arts EA, Nintendo NTDOY, Zynga and Activision Blizzard ATVI, apart from Tencent and Epic Games.

Activision’s Call of Duty: Black Ops 4, Call of Duty: Warzone and Call of Duty: Modern Warfare have been huge successes. Moreover, launched on Mar 10, Call of Duty: Warzone attracted more than 75 million players as of Aug 4.

Nintendo’s Animal Crossing: New Horizons gained substantial popularity within a short span of time. Moreover, EA’s Apex Legends, NBA Live 20, Plants vs. Zombies and Star Wars Jedi: Fallen Order were also a huge rage.

Key Developments in Q2

On Aug 18, Take Two announced that it has entered into a definitive agreement to acquire privately-held Playdots, Inc. for $192 million, including $90 million in cash and the balance in newly issued shares of Take-Two common stock. The studio has created three mobile hits, Dots, Two Dots and Dots & Co., which have been downloaded more than 100 million times.

On Jul 30, Take Two’s division 2K announced a partnership with OneTeam Partners and the National Football League Players Association (NFLPA) to include NFL players in multiple football games set to launch starting  2021.

On Jul 29, Take Two’s Private Division announced that it has three new publishing agreements with top independent developers Moon Studios, League of Geeks, and Roll7.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
TakeTwo Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
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