$Take-Two(TTWO)$ $NASDAQ(.IXIC)$
Take-Two Interactive Software (TTWO) is a leading developer and publisher of interactive entertainment for consumers around the globe. The company’s products are designed for console gaming systems, PCs as well as mobile devices. They are delivered through physical retail, digital download, online platforms, and cloud streaming services. The company focuses on publishing a selected number of titles based on internally owned and developed intellectual properties, including NBA 2K21,Grand Theft Auto, Borderlands series etc.
Investment Overview
Legacy titles and eSports games continue to gain momentum. TTWO has strong game franchises including NBA 2K21, Grand Theft Auto as well as Red Dead Online. These games continued to gain traction and recorded robust growth, taking up c.60% of revenue in 2021. We expect the company will deliver above-peer average EBITDA growth of 38% p.a. in the next two years, supported by strong legacy titles and upcoming e-sport games.
Strong multi-year pipeline offers substantial long-term upside. The company has strong track record of launching high-quality titles and is expected to have approximately 20 titles per year for the next several years, through a combination of new and existing franchises like NBA 2K23. The robust pipeline will drive sustainable revenue growth and earnings.
Acquisition strategy to expand addressable market. TTWO has acquired several development studios in 2021, including Playdots, Ruffian Games, HB Studios, to further expand its user base and addressable market. The acquisition of new studios will increase its franchises and benefit overseas expansion, boosting revenue growth.
Slower than expected monetisation ramp-up of new games. After relaxation of Covid measures, people are spending more time in outdoors which could affect the time spent on games and led to slower revenue growth. TTWO might incur more marketing expenses and user acquisition costs to promote new games, which might have an impact on earnings.
Potential share price catalyst includes (1) stronger than expected performance of newly launched games; (2) earnings upside from acquisition synergies; (3) better than expected international expansion.
Its recent results are not that fantastic which is a sign of inherent weakness. The stock is likely to be adversely affected by the economic headwinds and the impending recession. I will be Cautious in entering the stock at the moment as there are likely downsides toit.
DYODD
Modify on 2023-02-08 17:20
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[Miser]