As the gaming world excitedly awaits the release of Grand Theft Auto VI (GTA 6) sometime in 2025, Take-Two Interactive (NASDAQ:TTWO), the game’s developer, could see a boost over the next year, thanks to the buzz around the game. Driven by GTA 5 and GTA Online sales, TTWO’s Q2 results affirm the company’s potential for continued market strength. Coupled with favorable institutional activity and a robust game release pipeline, I believe the momentum might continue. I’m bullish on TTWO stock.
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The Buzz Around the Grand Anticipation
One of the most highly anticipated releases ever has already generated immense interest, breaking YouTube’s record for the most viewed “non-music video debut” in the first 24 hours, with over 93 million views. YouTube says Grand Theft Auto VI content has generated over 250 million views since the trailer launch.
Despite rumors of a December 7 trailer release back in November, the GTA 6 trailer was planned to launch on December 5. TipRanks’ Media Coverage Analysis tool picked up the sentiment early last month, with several articles pointing to bullish price action, evidenced by an eventual price spike.
The tool also captured the second buzz on December 4, when Rockstar Games, a Take-Two Interactive Software subsidiary, was forced to release the anticipated trailer on Monday instead of Tuesday due to a trailer leak on social media platform X. Access to such a sentiment tool has perks.
GTA 6 Buzz Spills Over to GTA 5
Undeniably, the wait around GTA 6 has triggered renewed interest in its predecessor, Grand Theft Auto V (GTA 5). GTA 5, the second most-sold game behind Minecraft, saw total sales reach 190 million copies as of September 2023. The GTA 5 sales trend indicates that older versions could see an uptick in sales as more details are revealed.
The entire GTA franchise has seen success, selling over 400 million copies to date. Since its launch in 2013, GTA 5 has generated around $7.68 billion in revenue. The approaching GTA 6 game is expected to surpass GTA 5 in first-year revenue by just under 60% (over 60% if GTA Online is launched in the first year). It is projected to generate $2.7 billion in sales in its first year at $69.99. If GTA 6 launches Online, revenues could approach the $3 billion mark, say analysts.
I am not an avid video game player, but I plan to take advantage of future announcements by closely monitoring media sentiment.
How Were TTWO’s Earnings Last Quarter?
In its recent Q2 results, TTWO largely attributed its positive results to GTA 5 and GTA Online sales. Earnings per share (EPS) came in at $1.22, surpassing the expected $1.03, while last year’s EPS stood at $1.30 in the same quarter.
Despite citing macroeconomic uncertainty, TTWO still reaffirmed its Fiscal Year 2024 net bookings guidance and its recurrent consumer spending growth (RCS) growth target in Grand Theft Auto Online, virtual currency, and GTA+ membership. Notably, recurrent consumer spending significantly contributed to its net bookings, accounting for 78% of total bookings.
With TTWO being the third-largest gaming company by market cap in an industry with an average price-to-earnings (P/E) ratio of 142, it has an attractive forward PE ratio of 40.7.
These results reflect the company’s strong market position and the continuing popularity of its gaming franchises.
Is TTWO Stock a Buy, According to Analysts?
On TipRanks, TTWO stock comes in as a Strong Buy based on 16 Buys and three Holds assigned in the past three months. The average TTWO stock price target for the company is $166.16, indicating a potential rise of 6% within the next 12 months. Five-star analysts Drew Crum of Stifel Nicolaus and Brian Fitzgerald of Wells Fargo (NYSE:WFC) recently assigned Buy ratings to TTWO, expecting 11.6% and 8.4% upside, respectively.
Even the most accurate TTWO analyst, Eric Handler of Roth MKM, who has a 94% success rate for TTWO, reiterated his Buy rating on December 5. Eric’s 44 ratings on the stock have an average return of 40.07%.
But it’s not just Wall Street Analysts joining. Based on recent hedge funds’ activity in 13F fillings, the Hedge Fund Confidence Signal tool for TTWO at TipRanks is Very Positive. In the last quarter, Gotham Asset Management LLC, Gamco Investors, Inc., et al, and Caxton Associates LP bought shares valued at over $19 million for an overall bullish signal. At the same time, Totem Point Management, LLC sold around $5 million in shares. Notably, about 90% of TTWO is owned by institutional investors.
Is TTWO Ready For a Boost?
The stock initially fell by 2% following the GTA 6 trailer announcement, as investors were disappointed with the projected 2025 launch. Any delay now could push the release out even further, affecting the company’s guidance. However, Grand Theft Auto VI is expected to significantly boost Take-Two’s revenue upon release.
Gamers have eagerly awaited details about the new GTA game for years, as it will be available on PlayStation 5 and Xbox Series X/S consoles. Only recently, TakeTwo’s Private Division released Rollerdrome, an imaginative third-person shooter-skater game for Xbox and Windows PC.
Despite concerns and fierce competition, TTWO’s game pipeline remains robust, with 16 upcoming game releases, including WWE 2K24, Star Wars Hunters, Game of Thrones: Legends, and more, scheduled for release at different times in the next few years.
While the anticipation around GTA 6 is electric, TTWO’s upcoming releases attest to keeping the momentum going.
TTWO: An Optimistic Future Ahead
The buzz around GTA 6, combined with Take-Two Interactive’s strong financials and positive analyst ratings, paints an optimistic picture for the company. However, potential risks related to the game’s release date should be monitored closely.
