Is Take-Two Interactive Software Worth Investing in?
Deciding whether to invest in Take-Two Interactive Software, the video game publisher, is not an obvious choice. Let’s take a closer look at this company to determine if it is worth the long-term investment.
What to Expect from Take-Two’s Anticipated Growth
Take-Two’s bold statement about entering its “next growth phase” provided limited details but stated that it expects net revenues from bookings for the fiscal year 2025 to exceed $8 billion. Net revenues from bookings are a form of adjusted revenues, which Take-Two defines as net products and services sold within a specified period.
For the current fiscal year 2024, the company forecasts net revenues from bookings to reach around $5.5 billion, indicating growth compared to the fiscal year 2023, which amounted to $5.3 billion. Therefore, the forecast of $8 billion for the fiscal year 2025 represents a significant revenue increase.
A key factor in achieving this goal could be the release of Grand Theft Auto VI, as announced by Take-Two. The previous installment in this franchise, Grand Theft Auto V, ranks among the top three best-selling video games of all time and generated 69% of Take-Two’s revenues after its release in 2013.
Even ten years later, the Grand Theft Auto franchise accounted for over 14% of Take-Two’s revenues in the first half of the fiscal year 2024. This is partially due to the online multiplayer mode, which requires a subscription fee and provides regular income for Take-Two.
Zelnick pointed out that “several” games will contribute to Take-Two’s net revenue growth. One of these games could be the popular Borderlands series, as a film adaptation based on the series is set to be released this year. At the very least, the film may reignite interest in Borderlands games.
Other Factors to Consider when Investing in Take-Two
The acquisition of Zynga presents another interesting aspect of investing in Take-Two’s stocks. In the fiscal year 2022, mobile game revenues accounted for 12% of the company’s revenues, but after acquiring Zynga, this share increased to 48% in the fiscal year 2023.
With Zynga, Take-Two now has a significant presence in the mobile gaming market. This market is expected to reach a value of $98.7 billion this year, representing an increase of nearly $10 billion compared to 2023, and is projected to reach $118.9 billion by 2027.
However, although Zynga’s acquisition increased Take-Two’s mobile gaming revenues, it did not contribute to profitability. In the first half of the fiscal year 2024, Take-Two incurred a net loss of $749.6 million, more than doubling the net loss of $361 million from the previous year.
Before the Zynga acquisition, the company consistently achieved profitability, but the costs associated with the acquisition resulted in net losses for Take-Two.
Choosing Take-Two Stocks
Zelnick’s bold revenue growth forecast seems to already be reflected in the stock price. In January of last year, Take-Two’s shares dropped to a 52-week low of $101.77 and then rose throughout the year 2023, reaching a peak of $164.85 in December.
Considering that the stock price remains close to this 52-week high, investing in Take-Two stocks at this moment carries some risk. However, the average target price for Take-Two stocks among Wall Street analysts is currently $170, with a consensus rating of “overweight.” Therefore, the stock price may still rise.
Even if the release of Grand Theft Auto VI is delayed and the game’s sales fall into the fiscal year 2026, Take-Two is still well-positioned for revenue growth in the long term.
The release of Grand Theft Auto VI is highly anticipated, with some experts predicting it could generate over a billion dollars in revenue within the first 24 hours of its release. Take-Two’s mobile gaming revenues benefit from a favorable growth trend in the industry. The company is well-positioned to return to profitability if it achieves the projected growth in net revenues. All these factors make Take-Two stocks worthy of consideration.
As the stock price is already high due to the expected sales growth in the fiscal year 2025, a good strategy is to use dollar-cost averaging when purchasing stocks. This involves buying stocks during price declines and continuing to buy shares during future price drops. Such a strategy reduces the risk of overpaying for stocks while ensuring participation in the company’s potential performance in the fiscal year 2025.
FAQ
The source of the article is from the blog coletivometranca.com.br