Take-Two's New Games, Digital Distribution Shift Underpin Bullish KeyBanc Thesis

The release of "Red Dead Redemption 2" combined with ongoing revenue from "GTA Online" and "NBA 2K" provide Take-Two Interactive Software, Inc. TTWO with sustainable short- and long-term catalysts that are likely to drive revenue above historical norms, according to KeyBanc Capital Markets.

The Analyst

Evan Wingren of KeyBanc Capital Markets maintained an Overweight rating and $144 price target on shares of Take-Two.

The Thesis

In the short term, Take-Two's valuation will primarily be driven by live service growth from "GTA Online" and "NBA 2K," along with anticipation metrics surrounding "Red Dead," Wingren said in a Wednesday note (See the analyst’s track record here).

Despite the uncertainty surrounding the release of "Red Dead," Wingren projects that sales of the game will be a major revenue driver over the next one to two years.

“The biggest catalyst for TTWO in the medium term is the launch of "RDR2" in fall 2018. We model 22 million units sold in fiscal 2019, but have an upside bias to that estimate," the analyst said.

Take-Two's long-term revenue will be driven by further market concentration among a select few titles, the potential release of new titles and an ongoing shift to digital game distribution, Wingren said.