Take-Two Crushed Its Earnings Estimates, Stock Fell 5%

Take-Two Interactive (NASDAQ:TTWO) stock lost about 5% in after-hours trading on Wednesday following its results for the fourth quarter of fiscal 2020. Notably, the quarter ended on March 31, 2020. The video game publisher posted better-than-expected results in the fourth quarter. However, the stock fell after Take-Two warned that the lockdown boom in video game playing won’t last.

According to a Bloomberg report, Take-Two CEO Strauss Zelnick said, “We do not have expectations for the increased engagement that we’ve seen of late through the back half of the year.”

Q4 earnings results

In the fourth quarter, Take-Two reported an adjusted EPS of $1.50 compared to $0.78 in the fourth quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $0.89 per share. Take-Two generated adjusted revenue of $729.4 million—a growth of 49.3% from the fourth quarter of fiscal 2019. The company beat analysts’ consensus revenue estimate of $584 million.

In the fourth-quarter earnings release, Zelnick said, “With more people staying at home, we have experienced, and are continuing to experience, heightened levels of engagement and Net Bookings growth-to-date.”

In the first quarter of fiscal 2021, Take-Two expects GAAP net revenue between $775 million and $825 million. The company also expects its GAAP EPS to be $0.90–$1.00 for the first quarter. Take-Two’s net bookings will likely be between $800 million and $850 million.

For fiscal 2021, Take-Two expects GAAP net revenue between $2.63 billion and $2.73 billion. The company also expects its GAAP EPS to be $2.60–$2.85 for fiscal 2021. Meanwhile, the net bookings will likely be between $2.55 billion and $2.65 billion.

Wall Street analysts expect Take-Two to report an adjusted EPS of $1.00 on revenue of $661.7 million in the first quarter. Analysts also expect Take-Two’s revenues to fall by 9.4% YoY in fiscal 2021 to $2.7 billion. The sales could rise by 26.6% YoY in fiscal 2022 to $3.4 billion. The adjusted earnings will likely fall by 20.9% YoY in fiscal 2021 to $4.42 per share. However, the profits could rise by 35.9% YoY to $5.72 per share in fiscal 2022.

Analysts’ recommendations for Take-Two stock

Among the 28 analysts following Take-Two stock, 19 recommend a “buy,” and nine recommend a “hold.” None of the analysts recommend a “sell.” Wall Street analysts’ mean target price on the stock is $141.68, which implies a 4% loss from the current level of $146.84. The consensus target price for the stock has risen from $131.25 in April—a growth of 7.9%.

Many analysts revised their target price for Take-Two stock after its fourth-quarter earnings report.

  • Jefferies increased its target price from $115 to $135.
  • Keybanc increased its target price from $144 to $160.
  • Credit Suisse increased its target price from $131 to $141.
  • Piper Sandler increased its target price from $141 to $146.
  • Benchmark increased its target price to $155.
  • Cowen and Company increased its target price from $139 to $150.
  • Stephens increased its target price from $110 to $130.
  • Wedbush increased its target price from $131 to $170.
  • Bernstein increased its target price from $137 to $158.
  • Oppenheimer increased its target price from $145 to $155.
  • Nomura Instinet increased its target price from $120 to $137.
  • Barclays increased its target price from $138 to $150.
  • Baird increased its target price from $135 to $150.

Peer comparison

Electronic Arts (NASDAQ:EA) reported adjusted revenue of $1.21 billion in the fourth quarter fiscal 2020, which ended in March—a fall of 11.1% YoY. The company’s adjusted EPS fell 17.6% YoY to $1.08. In the fourth quarter of fiscal 2019, Electronic Arts reported adjusted revenue of $1.36 billion and an adjusted EPS of $1.31. Analysts expected the company to post revenues of $1.19 billion and an adjusted EPS of $0.98 in the fourth quarter.

Activision Blizzard (NASDAQ:ATVI) reported adjusted revenue of $1.52 billion in the first quarter ended March—a growth of 21% YoY. The company’s adjusted EPS rose 87.1% YoY to $0.58. In the first quarter of 2019, Activision Blizzard reported adjusted revenue of $1.26 billion and an adjusted EPS of $0.31. Analysts expected Activision Blizzard to post revenues of $1.32 billion and an adjusted EPS of $0.38 in the first quarter.

Take-Two’s stock performance

Take-Two stock rose 3.2% on Wednesday and ended the day at $146.84. At this closing price, the company’s market cap is $16.7 billion. Notably, the stock is trading 1.6% below its 52-week high of $149.28 and 46.8% above its 52-week low of $100.00.

Based on the closing price on Wednesday, Take-Two stock was trading 13.6% above its 20-day moving average of $129.23. The stock is also trading 20.5% above its 50-day moving average of $121.85 and 21.2% above its 100-day moving average of $121.13. Take-Two’s 14-day relative strength index number is 79. The number suggests that the stock is overbought.

On Wednesday, gaming stocks Electronic Arts, Activision Blizzard, and Zynga (NASDAQ:ZNGA) returned 0.85%, 1.03%, and 1.24%, respectively. On the same day, the Dow Jones and the S&P 500 rose 1.52% and 1.67%, respectively. To learn more, read BofA Survey: Fund Managers Expect Stock Market Crash.