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Why Greenlight Capital bought stake in Take-Two Interactive

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Feb. 24 2014, Updated 8:00 a.m. ET

Greenlight Capital and Take-Two Interactive

Greenlight disclosed a 0.99% new position in Take-Two Interactive (TTWO), a developer, marketer, and publisher of interactive entertainment for consumers around the globe. The company develops and publishes products through its two wholly owned labels, Rockstar Games and 2K.

Take-Two Interactive Software reported strong sales and earnings for 3Q 2014. Profit almost doubled, to $578.4 million or $4.69 earnings per share, from $70.9 million or $0.66 earnings per share in the same period a year ago. The company’s revenue for the quarter reached $1.86 billion from the $415.8 million revenue recorded last year. These results were driven by robust holiday demand for Grand Theft Auto V, the franchise record-breaking launch of NBA 2K14, the successful release of WWE 2K14, and strong growth in digitally delivered revenues led by Grand Theft Auto Online. Take-Two was the top video game publisher of 2013, according to the NPD Group, underscoring the company’s positive momentum over the past year. The company said Grand Theft Auto V has sold more than 32.5 million units.

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Take-Two raised its fiscal 2014 outlook, but fiscal 4Q guidance came in below current Street estimates. For the full year, Take-Two forecasted adjusted earnings per share of $4.15 to $4.25 and net revenue of $2.35 billion to $2.38 billion. The company expects to break even or earn up to $0.10 per share in 4Q on adjusted revenue of $170 million to $200 million. Analysts lowered estimates for the company because of the lack of significant new titles. A Piper Jaffray analyst noted, “Strong results during the December quarter with mixed March quarter guidance could suggest [the online version of GTA] is not monetizing at as high a rate as some expected.”

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