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Take Two (TTWO) to Report Q3 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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Take Two Interactive TTWO is set to report third-quarter fiscal 2021 results on Feb 8.

For the quarter, the company expects GAAP net revenues between $760 million and $810 million and GAAP earnings between $1.10 and $1.21 per share.

The Zacks Consensus Estimate for fiscal third-quarter earnings has improved 3.3% to 94 cents per share over the past 30 days.

The consensus mark for revenues is pegged at $745.9 million, indicating a decline of 16% 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 49.02%, 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 social distancing norms are 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 third quarter, including the release of NBA 2K21, GTA Online’s latest update The Cayo Perico Heist, season 7 of WWE SuperCard, and the relaunch of the critically acclaimed looter-shooter, Borderlands 3 are expected to have boosted active user growth and contributed to the company’s top line.

Moreover, NBA 2K21, GTA Online and GTA V, Red Dead Redemption 2 and Red Dead Online, Social Points mobile games, Borderlands 3, Sid Meier's Civilization VI and PGA Tour 2K21 are expected to have been the largest contributors to net bookings in the to-be-reported quarter.

This Zacks Rank #2 (Buy) company expects net bookings between $675 million and $725 million in the fiscal third quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, digitally delivered net bookings are projected to account for 82% of the total net bookings compared with 78% last year.

However, the company expects digitally delivered net bookings to be down 15% year over year, due to lower digitally delivered sales of Red Dead Redemption 2 on PC and Outer Worlds, which was launched last year.

The company assumes that 71% of current generation console games will be delivered digitally, up from 44% in the same period last year.

Other Factors at Play

Moreover, strong video game spending is expected to have benefited Take-Two. Per Venturebeat, which cited NPD data, U.S. video game sales in October, November and December increased 14%, 35% and 25%, 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 third quarter, Take-Two expects recurrent consumer spending to grow approximately 5% year over year driven.

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. Markedly, Activision’s Call of Duty: Mobile generated more than $14 million in player spending in the first week of its release, per a report by Sensor Tower.

Nintendo’s Animal Crossing: New Horizons gained substantial popularity within a short span of time. Moreover, EA’s FIFA 21, Need for Speed Hot Pursuit Remastered and Star Wars: Squadrons gained popularity during the quarter.

Key Developments in Q3

On Oct 14, Take Two’s wholly owned subsidiary Rockstar Games announced the acquisition of Ruffian Games. Based in Dundee, Scotland, the studio will operate under the new name of Rockstar Dundee. The terms of the acquisition were not disclosed.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report

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Nintendo Co. (NTDOY) : Free Stock Analysis Report

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