Pro says ‘Take-Two shares are attractive’ despite weak guidance

Take-Two Interactive Software Inc (NASDAQ: TTWO), on Monday, reported weaker-than-expected results for its fiscal Q3 and lowered its guidance for the future. Shares are still keeping their own in after-hours.

Take-Two’s guidance for the future

For its current quarter, the video game holding company now forecasts $1.31 billion to $1.36 billion of net bookings. Experts had forecast a much higher $1.5 billion instead.

It’s full-year outlook also fell shy of estimates. Still, CFRA’s John Freeman said on Yahoo Finance:

The glow of the heightened engagement we saw post-COVID has faded. But longer-term, I have a lot of confidence in immersive, protometaverse type games like GTA.

Take-Two shares are roughly flat for the year at writing.

Take-Two Interactive to lower costs

Take-Two Interactive also announced a cost reduction programme in pursuit of lowering its annual expense by $50 million. According to Freeman, he likes the stock from the valuation standpoint as well.

If you’re a long-term, patient investor who can ride the ups and downs of the video game industry, then I think Take-Two shares are really attractive.

Take-Two expects annual cost synergies worth $100 million from its recent acquisition of Zynga as well (source) – but Freeman is concerned that it may run into “integration issues”.

Take-Two shares down on weak Q3 results

• Lost $153.4 million that translates to 91 cents per share
• That compares to $144.6 million of net income last year
• Adjusted EPS printed at 86 cents as per the press release
• Total net revenue jumped 56% YoY to $1.41 billion
• Consensus was 89 cents EPS on $1.48 billion in revenue
• Net bookings were up a less than expected 60% in Q3

Take-Two Interactive attributed the weakness this quarter primarily to the console side of its business. Still, CFRA’s Freeman noted:

I think console is still relevant. It does bring those immersive games that the real hardcore gamers get into. You don’t get that kind of immersive experience from a mobile game.

Wall Street has a consensus “overweight” rating on this tech stock.