Take-Two Analysts Unfazed By 'Conservative' Guidance

Shares of Take-Two Interactive Software Inc TTWO shares were bouncing back Tuesday despite reporting soft net bookings in the fourth quarter and lukewarm guidance, with investors and analysts anticipating a long tail for the game-maker’s “Red Dead Redemption” and a coming catalyst in the form of an online "Red Dead."

Take-Two reported EPS of 78 cents per share, just beating Street expectations. Sales of $539 million beat the $506.46-million consensus estimate. 

The video game maker issued a soft bookings outlook for 2020, though several analysts appeared to view the company’s guidance as conservative.

The Analysts

Bank of America Merrill Lynch's Justin Post reiterated a Buy rating on Take-Two and lowered the price objective from $130 to $128.

MKM Partners’ Eric Handler reiterated a Buy rating and $115 price target.

KeyBanc Capital Markets' Evan Wingren reiterated an Overweight rating and lowered the price target from $152 to $133.

Bank Of America Merrill Lynch

Take-Two's quarterly results brought a disappointing close to the fiscal year, especially given strong early unit sales for “Red Dead Redemption 2,” and a soft start to the new fiscal year, Post said in a Tuesday note. 

“But 'Red Dead Online' content is coming soon, and we also expect a 'Red Dead' PC title, an improving 'Grand Theft Auto' Online content calendar, and a strong 'Borderlands' release as FY20 catalysts." 

MKM Partners 

Handler was also optimistic about the softer guidance and said MKM continues to see Take-Two as its “Top Idea” for 2019.

The company has a track record of issuing conservative guidance and is spending on a R&D ramp to put new titles in the pipeline, the analyst said in a Tuesday note. 

Handler is also optimistic about “Red Dead Online,” continued growth for “NBA 2K” and the release of “Borderlands 3” and “The Outer Worlds.”

KeyBanc Capital Markets 

Wingren also said Take-Two is underselling the coming year.

“Given the large investment in marketing in 'Red Dead Online' and 'Borderlands 3,' and a healthy gaming market at large, we see (the guidance) as likely to prove conservative, assuming the content is high quality,” the analyst said in a Monday note. 

Price Action

Investors seemed to agree with the analysts: Take-Two Interactive shares were up 5.34 percent at $105.35 at the time of publication Tuesday. 

Related Links:

Take-Two Shares Bounce Back, Analysts Lower Price Targets

Sony Zaps Take-Two M&A Rumor; BofA Says Company Seems Pricey

Screenshot courtesy of Take-Two.