Take-Two shares give up 15% on ‘draconian’ guidance

on Nov 7, 2022
  • Take-Two Interactive reports weaker-than-expected results for its fiscal Q2.
  • The video game company also lowered its guidance for the future.
  • Take-Two shares are now down roughly 50% versus the start of the year.

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Shares of Take-Two Interactive Software Inc (NASDAQ: TTWO) slid more than 15% in extended trading after the video game company reported a disappointing Q2 and lowered its future guidance.

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Take-Two Interactive’s guidance for bookings

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Take-Two now forecasts $5.4 billion to $5.5 billion of net bookings this year. In comparison, analysts had called for $5.9 billion instead. In the earnings press release, CEO Strauss Zelnick said:

Our reduced forecast reflects shifts in our pipeline, fluctuations in FX rates, and a more cautious view of the current macroeconomic backdrop, particularly in mobile.

He lowered estimate (net bookings) for the third quarter as well to $1.43 billion to $1.48 billion – also short of Street expectations.

CFRA analyst reacts to the guidance

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In terms of revenue, Take-Two trimmed its outlook to $5.41 billion to $5.51 billion for the year and up to $1.48 billion for the quarter. Reacting to the guidance, John Freeman (CFRA analyst) said on Yahoo Finance:

This is the Christmas season they’re guiding about and $200 million difference is a lot. The macro situation is pessimistic but there might be something more specific going on. Because otherwise, the guidance was pretty draconian.

Ahead of the earnings call, he has a “buy” rating on Take-Two shares and a price target of $148 – that’s close to a 60% upside from here.

Take-Two shares down on Q2 results

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  • Lost $257 million that translates to $1.54 per share
  • That compares to $10.2 million in income last year
  • Revenue jumped 62% year-on-year to $1.39 billion
  • Consensus was 95 cents loss on $1.55 billion revenue
  • Has $1.3 billion of cash and short-term investments

Other notable figures in the earnings report include total net bookings and recurrent consumer spending that were up 53% and 95%, respectively. Wall Street has a consensus “overweight” rating on Take-Two shares.

What else was noteworthy?

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Take-Two Interactive says it can lose as much as $674 million this year. On the flip side, though, the Chief Executive said:

We remain highly confident in our diverse and extensive development pipeline that we expect will deliver us sequential years of growth and record performance.

Year-to-date, Take-Two shares have been cut in half now. Earlier this year, the Nasdaq-listed firm spent $12.70 billion to buy Zynga (link). Updating on that, CEO Zelnick added:

We continue to make excellent progress with integration of Zynga and remain optimistic about vast, long-term growth potential for mobile industry, which is expected to reach over $160 billion in gross bookings within the next four years.

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