![]() ![]() We're still talking about perhaps 18 months or so before the game might release, and Wall Street is not the patient type. This video game stock is due for another bull run, but I wouldn't be too quick to pull the trigger. Now the company is on the verge of launching several titles that have been in the works, including a new Grand Theft Auto. Take-Two's stock has been essentially flat for the last five years, following a terrible year where it was cut in half. Although acquisition-related costs caused Take-Two to report a loss in the quarter, Zynga is expected to be highly accretive to the company's bottom line in the years to come, which also probably factors into management's bullish outlook. Management also reported that the integration of mobile game maker Zynga is going well. That's evident in its operating history, the current performance of its top games, and management's guidance for the next few years. The important thing is that Take-Two has clearly got a lot of growth ahead. Successful investing is more than buying the stocks with the lowest valuation ratios. On that basis, Take-Two's 4.3 multiple is less than Electronic Arts' 4.7 and Activision Blizzard's 7.5. On the other hand, Take-Two looks undervalued on the basis of another useful valuation metric - the price-to-sales ratio. That implies a current price-to-cash flow multiple of 24. ![]() It still looks expensive when using management's guidance for $1 billion in adjusted cash flow in fiscal 2025. But many investors would have balked at the company's inconsistent profit history and expensive valuation on a price-to-earnings basis. Ironically, in the five years leading up to the previous release, the stock had also just been through a period of underperformance, up only 11%. Will the stock repeat that same performance over the next decade following the release of GTA VI? We can see the huge returns investors would have made if they had bought shares of Take-Two right after the release of GTA V. Combined, the two games sold well over 200 million copies, which is indicative of a massive built-in audience for the next GTA release.ĭata by YCharts Can the stock climb higher? We also have to include the base revenue from Red Dead Redemption 2 which has sold more than 53 million copies since launching in 2018. What this means is high demand for the next installment - probably greater than any previous release in the series. That represents nearly half of the 400 million copies the GTA franchise sold throughout its 20-plus-year history. Over the last nine years since that release, Take-Two sold over 180 million copies of the game. Operating profit jumped from just $5 million the previous year to $415 million. In Take-Two's fiscal 2014 (which ended in March), revenue nearly doubled to $2.35 billion. Take-Two management stated that "active development for the next entry in the Grand Theft Auto ( GTA) series is well underway." While the company has previously announced dozens of new games that are planned for release over the next three years, there would be only one reason for management to guide for such a substantial increase in bookings in fiscal 2025.Īll we must do is look at what the previous release in the GTA series did for Take-Two's top line. Grand Theft Auto grows with almost every release Let's look at what this means for Take-Two, and whether investors should pull the trigger after the stock's recent jump. This is a big jump over fiscal 2024 guidance for bookings of approximately $5.5 billion, which likely points to a possible release in the Grand Theft Auto series as early as next year. Take-Two expects to deliver a record $8 billion in bookings (a non-GAAP measure of revenue) and $1 billion in adjusted unrestricted operating cash flow. ![]() Management's financial outlook for fiscal 2025 is what got the market most excited. ![]()
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