After a Series of Video Game Release Delays, BMO Downgrades Take-Two (TTWO) to Market Perform

September 17, 2021 8:36 AM EDT
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Shares of Take-Two Interactive Software (NASDAQ: TTWO) are down over 1% after BMO analyst Gerrick Johnson downgraded to Market Perform from Outperform following a series of video game release delays.

Delays are now becoming “more of a disconcerting trend,” says Johnson, as investors are already worried about lower video game consumptions as the world emerges from COVID restrictions. China also poses a degree of risk.

“Tighter restrictions on online video game playing in China for children under 18 could affect TTWO more than other companies we cover. While TTWO generates less than 3% of net bookings from China, it is looked to as a growth opportunity. TTWO has consistently called out NBA 2K Online in China as a significant contributor to its financial results. It is the number one PC online sports game in China, with nearly 55 million registered users in the country,” Johnson wrote in a client note.

Furthermore, the analyst sees a heightened regulatory risk after the California Department of Fair Employment and Housing introduced a lawsuit against Activision Blizzard (NASDAQ: ATVI)

“We anticipate the entire video game industry to come under intense scrutiny going forward. In situations like this, we expect content within TTWO's Grand Theft Auto Games, which many find objectionable, to become a lightning rod for critics.

As a result, the analyst also cut the price target to $150.00 per share from the prior $215.00.

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