Take-Two (TTWO) Lower as Sales Drop but Earnings and Guidance Beat Pushes Firms to Raise PTs

Shares of Take-Two Interactive Software (NASDAQ: TTWO) are trading 4.5% lower in pre-open Tuesday after the company posted a drop in quarterly adjusted sales.

Moreover, investors seem to be disappointed that the video game publisher didn't announce any new big releases.

Take-Two reported that its adjusted third-quarter revenue fell to $814.3 million from $888.2 million, but still higher than the market analysts’ estimates of $747 million. The company also hiked its full-year adjusted revenue forecast to a range of $3.37 billion to $3.42 billion, higher than the previously-communicated range of $3.15 billion to $3.25 billion.

The midpoint of the raised guidance of $3.395 billion came in higher than the Street consensus of $3.3 billion.

Still, Oppenheimer analyst Andrew Uerkwitz maintained an “Outperform” rating and raised the price target to $230.00 per share from the prior $190.00 amid high interest for TTWO’s flagship GTA video game.

“In calendar 2020, GTA V/ GTAO had one of its best years with record unit sales (second only to launch year) and monthly users. In a year with plenty of expected delays and disappointments, GTA and next gen optimized NBA 2K became the rare few brands players can count on for quality entertainment. Management will keep investors guessing for FY22 outlook and guidance until May (F4Q21 earnings), but strength in TTWO's core franchise needs less proving for next FY,” Uerkwitz wrote in a note.

The TTWO stock price was also hiked to $230.00 (up from $186.00) at Piper Sandler, whose analyst Yung Kim maintained an “Overweight” rating, also impressed by the GTA sales performance.

“GTA Online's trajectory continues to defy gravity. While results in FY21 received a significant boost from stay-at-home regulations around CV-19, GTA was a significant beneficiary of the record levels of engagement for the entire industry. Growth in FY22 and beyond will be challenging, but mgmt continues to believe its pipeline of 93 titles in development can bear fruit over the next five year. While we lack visibility on the titles in development, we remain confident that GTA can sustain its momentum until the next iteration is announced,” he wrote in today’s note.

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