Take-Two Interactive Sets All-Time High After Earnings Top Estimates
Take-Two Interactive Software, Inc. (TTWO) surged 5.44% in after-hours trade Monday on the back of better-than-expected quarterly results. The videogame publisher behind “Grand Theft Auto” and “NBA 2K” titles reported fiscal first-quarter (Q1) adjusted earnings of $2.68 a share, up from 27 cents in the year-ago period and easily outpacing analysts’ forecasts of $1.58 a share.
Net bookings of $996.20 million also exceeded Street projections and grew 136% from the June 2019 quarter. The company credited the blowout results to more people staying at home playing video games during the pandemic and the absence of a costly Q1 blockbuster title launch. As of Aug. 4, Take-Two Interactive stock has a market value nearing $20 billion and trades 37% higher year to date (YTD). Despite the strong gains, the shares lag the electronic gaming and multimedia industry average over the same period by 36.98%.
Management also raised its full-year guidance in which it now expects a profit of $3.04 to $3.30 per share and bookings of $2.8 billion to $2.9 billion. It had previously forecast a profit range of $2.60 to $2.85 a share on net bookings of $2.55 billion to $2.65 billion. “As a result of our better-than-expected first-quarter operating results and increased forecast for the balance of the year, we are raising our fiscal 2021 outlook, which is poised to be another great year for Take-Two,” CEO Strauss Zelnick told investors during the conference call, per Barron’s.
Wall Street View
Analysts remain in the bull camp as the trend of people staying closer to home looks like continuing for the foreseeable future. The stock currently receives 18 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 9 ‘Hold’ ratings. Price targets range from as high as $189 to as low as $137, with a median consensus of $167. This implies an upside potential of just 1.8%. Moreover, Take-Two Interactive shares appear fully priced from a valuation standpoint, given they trade at around 45 times forward earnings – well above their five-year average multiple of 30 times.
Technical Outlook and Trading Tactics
The video game maker’s share price has trended sharply higher since the March low, with only one steep pullback to the 50-day simple moving average (SMA). Yesterday’s earnings result propelled the stock to an all-time time (ATH) on above-average volume. Given the relative strength index (RSI) sits above the 70 overbought threshold, active traders should consider waiting for a retracement entry. Look for “buy the dip” opportunities at the $144 level, where price finds support from a horizontal trendline and the 50-day SMA. In terms of trade management, consider placing a stop-loss order somewhere below $160 and using a short-period moving average as a trailing stop.