Calculating The Fair Value Of Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

Simply Wall St.11-18

Key Insights The projected fair value for Take-Two Interactive Software is US$155 based on 2 Stage Free Cash Flow to Equity Current share price of US$178 suggests Take-Two Interactive Software is ...

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(NASDAQ:TTWO)","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n The projected fair value for Take-Two Interactive Software is US$155 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$178 suggests Take-Two Interactive Software is ...</p>\n\n<a href=\"https://finance.yahoo.com/news/calculating-fair-value-two-interactive-130011929.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Calculating The Fair Value Of Take-Two Interactive Software, Inc. (NASDAQ:TTWO)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCalculating The Fair Value Of Take-Two Interactive Software, Inc. (NASDAQ:TTWO)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-18 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/calculating-fair-value-two-interactive-130011929.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for Take-Two Interactive Software is US$155 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$178 suggests Take-Two Interactive Software is ...</p>\n\n<a href=\"https://finance.yahoo.com/news/calculating-fair-value-two-interactive-130011929.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2095319765.USD","symbol_name":"Natixis Thematics Subscription Economy R/A USD","start_time":0,"source_url":"https://finance.yahoo.com/news/calculating-fair-value-two-interactive-130011929.html","article_id":"2484756716","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/NgcLLPr1LyOPReVucpZw9w--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/f03d17bfb9bd39baa89c6655dcfb03d3"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484756716","pubTimestamp":1731934811,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The projected fair value for Take-Two Interactive Software is US$155 based on 2 Stage Free Cash Flow to Equity. Current share price of US$178 suggests Take-Two Interactive Software is potentially trading close to its fair value. Analyst price target for TTWO is US$188, which is 21% above our fair value estimate. In this article we are going to estimate the intrinsic value of Take-Two Interactive Software, Inc.  by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow  model. There's really not all that much to it, even though it might appear quite complex.Check out our latest analysis for Take-Two Interactive Software. After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed th","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","BK4085":"互动家庭娱乐","LU1280957306.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQUITIES \"AUP\" (USD) INC","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","LU0081259029.USD":"UBS (LUX) EQUITY FUND - TECH OPPORTUNITY \"P\" (USD) ACC","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","QID":"纳指两倍做空ETF","IE00B64PRP62.GBP":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (GBP) ACC","BK4100":"有线和卫星","BK4554":"元宇宙及AR概念","FCF":"第一联邦金融","IE00B3QW5Z07.USD":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (USD) ACC","TV":"墨西哥电视","IE00BGHQF748.EUR":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4585":"ETF&股票定投概念","NDAQ":"纳斯达克OMX交易所","SQQQ":"纳指三倍做空ETF","QLD":"纳指两倍做多ETF","PSQ":"纳指反向ETF","BK4211":"区域性银行","BK4524":"宅经济概念","BK4112":"金融交易所和数据","BK4588":"碎股",".IXIC":"NASDAQ Composite","TQQQ":"纳指三倍做多ETF","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","TTWO":"Take-Two Interactive Software"},"translate_title":"计算Take-Two Interactive Software，Inc.（纳斯达克：TTWO）的公允价值","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TV":1,".IXIC":1,"FCF":1,"DCF":1,"NDAQ":1,"TTWO":1,"QLD":0.6,"QID":0.6,"PSQ":0.6,"SQQQ":0.6,"TQQQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"Key Insights\n\n The projected fair value for Take-Two Interactive Software is US$155 based on 2 Stage Free Cash Flow to Equity \n Current share price of US$178 suggests Take-Two Interactive Software is potentially trading close to its fair value \n  Analyst price target for TTWO is US$188, which is 21% above our fair value estimate \n\n In this article we are going to estimate the intrinsic value of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. \n Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n Check out our latest analysis for Take-Two Interactive Software \n Is Take-Two Interactive Software Fairly Valued? \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \n-US$299.6m\nUS$1.48b\nUS$1.52b\nUS$1.55b\nUS$1.59b\nUS$1.63b\nUS$1.67b\nUS$1.72b\nUS$1.76b\nUS$1.81b\n\n\nGrowth Rate Estimate Source\nAnalyst x4\nAnalyst x6\nAnalyst x6\nEst @ 2.41%\nEst @ 2.47%\nEst @ 2.52%\nEst @ 2.55%\nEst @ 2.57%\nEst @ 2.58%\nEst @ 2.59%\n\n\n Present Value ($, Millions) Discounted @ 7.6% \n-US$278\nUS$1.3k\nUS$1.2k\nUS$1.2k\nUS$1.1k\nUS$1.1k\nUS$1.0k\nUS$957\nUS$913\nUS$870\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$9.3b\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.6%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$1.8b× (1 + 2.6%) ÷ (7.6%– 2.6%) = US$37b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$37b÷ ( 1 + 7.6%)10= US$18b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$27b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$178, the company appears around fair value at the time of writing. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NasdaqGS:TTWO Discounted Cash Flow November 18th 2024\n \n\n Important Assumptions \n We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Take-Two Interactive Software as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.6%, which is based on a levered beta of 1.204. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Take-Two Interactive Software\n\n\nStrength\n\nDebt is well covered by earnings.\n\n\nBalance sheet summary for TTWO.\n\n\n\nWeakness\n\nExpensive based on P/S ratio and estimated fair value.\n\n\nShareholders have been diluted in the past year.\n\n\n\nOpportunity\n\nForecast to reduce losses next year.\n\n\n\nThreat\n\nDebt is not well covered by operating cash flow.\n\n\nHas less than 3 years of cash runway based on current free cash flow.\n\n\nIs TTWO well equipped to handle threats?\n\n\n\n Moving On: \n Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Take-Two Interactive Software, we've compiled three additional aspects you should further examine: \n\n Risks: To that end, you should be aware of the   2 warning signs  we've spotted with Take-Two Interactive Software . \n Future Earnings: How does TTWO's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. \n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. 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