Does Take-Two Stock Have Upside Potential?

Is Take-Two stock undervalued?

Take-Two (TTWO) stock has gained just 2.0% in 2019 and is up 8.5% since the start of May 2019. Does the recent upward rally provide an opportunity for investors to enter this stock, or will it undergo a correction?

TTWO stock is trading at a forward PE multiple of 21.05x. In comparison, its EPS are expected to rise at a compound annual growth rate of 16.3% in the next five years, indicating that its shares are a bit expensive considering its PE.

Does Take-Two Stock Have Upside Potential?

TTWO’s estimated five-year PEG (PE-to-growth) multiple is 1.4x. A PEG multiple of below 1 suggests that a stock is undervalued. However, all this could drastically change if Take-Two releases Grand Theft Auto 6 by next year.

This year, Take-Two’s overall sales will be driven by sales of Red Dead Redemption 2. The game sold 23 million units within the first three days of its launch and achieved the biggest opening weekend in entertainment history with sales of $725 million.

How does Wall Street view TTWO?

Among the 20 analysts tracking TTWO, 16 have given it “buys,” and three have given it “holds.” One analyst has given it a “sell.” Analysts’ 12-month average target price for TTWO is $120.68, while their median estimate is $121. TTWO is trading at a discount of 15.0% to analysts’ median estimate.

Shares of peers Electronic Arts (EA), Activision Blizzard (ATVI), and Zynga (ZNGA) are trading at discounts of 20.0%, 25.0%, and 14.0%, respectively, to Wall Street’s average 12-month target estimates.