VIDEO GAME COMPANY TAKE-TWO INTERACTIVE RECEIVES ADJUSTED PRICE TARGET
Wolfe Research, a leading financial research firm, has revised its price target for Take-Two Interactive, a prominent player in the video game industry. The firm has reduced the target to $180, down from the previous $186, but maintains its Outperform rating on the stock.
The adjustment comes after Take-Two reported its third fiscal quarter of 2024 results, which were in line with or exceeded guidance. The company reported impressive revenue of $1.37 billion and net bookings of $1.34 billion. Notably, Take-Two’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) reached $147 million, surpassing both the analyst’s estimate of $98 million and the consensus of $106 million.
While these quarterly figures showcase Take-Two’s strong performance, the company’s outlook for the fourth fiscal quarter of 2024 and the full fiscal year 2025 has been revised downward. This adjustment is a response to the costs associated with the company’s commitment to producing high-quality games. The analyst specifically points out the inevitable delays, with a slip in the release schedule for the highly anticipated Grand Theft Auto (GTA) series.
Despite this setback, Wolfe Research emphasizes Take-Two’s impressive portfolio, describing it as “best-in-class” with hits that come “once-in-a-decade.” These exceptional games are expected to drive sustained earnings growth, assuming the company executes as anticipated. In fact, the firm’s revised estimates for fiscal year 2026 suggest a favorable valuation of 18.5 times EBITDA and a free cash flow (FCF) yield exceeding 6%.
In light of these findings, the report reiterates the Outperform rating, highlighting the potential for upside in Take-Two’s stock as net bookings increase and costs are effectively managed.
InvestingPro Insights provide additional perspective on Take-Two Interactive’s position in a challenging market. The company currently boasts a market capitalization of $26.43 billion and has achieved an impressive 11.64% revenue growth. However, profitability has been under pressure, with a negative Price/Earnings (P/E) ratio of -18.08 and an adjusted P/E ratio of -60.18, indicating ongoing earnings challenges.
Furthermore, analysts have lowered their earnings expectations for the upcoming period, which may have contributed to the company’s negative earnings per share figures. Additionally, Take-Two currently faces potential liquidity risks, as its short-term obligations exceed its liquid assets. However, analysts are optimistic that Take-Two will return to profitability this year, offering hope for future financial stability.
On a positive note, Take-Two’s EBITDA growth has been remarkable, with an impressive increase of 166.75% over the past twelve months as of Q3 2024. This growth reflects the company’s effective management of operational costs and suggests resilience in navigating the industry’s challenges.
It is worth noting that Take-Two does not currently pay dividends to shareholders, which could be a consideration for income-focused investors.
Overall, despite the challenges faced by Take-Two Interactive, the revised price target and Outperform rating from Wolfe Research indicate potential for growth in the stock. As the company continues to deliver high-quality games and effectively manage costs, it may be able to drive sustained earnings growth and secure a strong position in the industry.
Analyst comment
Positive news.
As an analyst, the market for Take-Two Interactive is expected to see growth. The company’s strong performance and impressive portfolio of games are likely to drive sustained earnings growth. Despite setbacks and lowered earnings expectations, the potential for upside in the stock exists as net bookings increase and costs are effectively managed.
