Take-Two stock price plunges despite record GTA sales

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Written on Feb 11, 2021

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The company’s Q3 adjusted revenue dropped to $814.3 million from $888.2 million
Analysts seem disappointed with the lack of new titles announced
Take-two stock price trades down 3.7% on the week and 0.3% in February

Shares of Rockstar Games and 2K owner Take-Two Interactive Software Inc (NASDAQ: TTWO) are trading about 7% lower from the most recent record highs following the company’s earnings report that showed a drop in quarterly adjusted sales.

Fundamental analysis: A quarterly drop in sales

The company’s Q3 adjusted revenue dropped to $814.3 million from $888.2 million, but still outstripping analysts’ expectations of $747 million. Analysts seem disappointed with the lack of new titles announced by the video games giant, although sales of Grand Theft Auto (GTA) units continue to impress.

“They haven’t announced any new games for next year … They haven’t done so all year, so investors are getting a bit frustrated waiting,” said Michael Pachter, an analyst at Wedbush Securities.

Take-Two raised its full-year adjusted revenue outlook to $3.37 billion – $3.42 billion range, compared to an earlier forecast of $3.15 billion – $3.25 billion. Analysts were anticipating sales of $3.3 billion, according to Refinitiv IBES data.

On the other hand, Take-Two’s rival Electronic Arts has bought a mobile video game developer Glu Mobile for $2.4 billion. In December, EA also outbid Take-Two and bought U.K.-based video game maker Codemasters for $1.2 billion.

Strauss Zelnick, CEO of Take-Two Interactive said losing the Codemasters deal to EA was “disappointing”.

“I suppose there is some concern about ‘missed opportunity’, but nobody expected Take-Two to buy Glu today,” Pachter added.

The publisher of Grand Theft Auto and 2K games has increased its annual adjusted sales targets on sustained demand for its major titles, as the coronavirus pandemic continues to positively impact the video game industry.

Technical analysis: Profit-taking yields a rotation lower

TTWO stock price is trading about 7% from the record highs printed a day before the quarterly earnings were released. Overall, shares are down 3.7% on the week and 0.3% in February.