It has been about a month since the last earnings report for Take-Two Interactive (TTWO). Shares have added about 8.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Take-Two due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Take-Two Reports Loss in Q2 Earnings, Revenues Up Y/Y
Take-Two Interactive Software reported second-quarter fiscal 2023 loss of $1.54 per share against the year-ago quarter’s earnings of 9 cents per share.
Net revenues jumped 62.4% year over year to $1.39 billion. Net bookings increased 52.8% to $1.50 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at $1.25 per share and $1.52 billion, respectively.
Game revenues (87.5% of revenues) improved 46.4% year over year to $1.22 billion. Advertising revenues (12.5% of revenues) jumped 585.1% year over year to $174.7 million.
Take-Two experienced healthy player engagement, driven by exciting new game releases, post-launch content updates and strong adoption of its mobile offerings.
Top-line growth benefited from strong adoption titles, including NBA 2K22 and NBA 2K23, Grand Theft Auto Online and Grand Theft Auto V, Empires & Puzzles, Rollic's hyper-casual portfolio, Toon Blast, Red Dead Redemption 2 and Red Dead Online, Words With Friends, Merge Dragons! and Toy Blast.
Grand Theft Auto V exceeded Take Two’s expectations and to date has sold more than 170 million units worldwide. In the reported quarter, Take-Two launched NBA 2K23. To date, NBA 2K23 has sold nearly 5 million units, alongside significant growth in virtual currency sales.
Red Dead Redemption 2 sold more than 46 million units worldwide to date.
Digital revenues (94.7% of revenues) improved 69.3% year over year to $1.32 billion. Physical retail revenues (5.3% of revenues) declined 6.1% year over year to $74.3 million.
Region-wise, revenues from the United States (60.5% of revenues) soared 63.7% year over year to $842.9 million. International revenues (39.5% of revenues) increased 60.4% year over year to $550.6 million.
Based on platforms, revenues from consoles (39.6% of revenues) decreased 7.4% year over year to $551.9 million. Revenues from mobile (52.4% of revenues) surged 534.3% year over year to $369.6 million. Revenues from PC and other (8% of revenues) decreased 24.1% year over year to $111.5 million.
Take-Two’s gross profit increased 69.3% year over year to $679.6 million. Reported gross margin of 48.8% expanded 200 basis points on a year-over-year basis.
Operating expenses surged 144.4% year over year to $932.1 million.
Operating loss was $252.5 million against the year-ago quarter’s operating income of $20.1 million.
As of Sep 30, 2022, Take-Two had $1.90 billion in cash, cash equivalents and short-term investments compared with $2.55 billion as of Jun 30, 2022.
The company had a debt of $3.3 billion as of Sep 30, unchanged sequentially.
Net cash provided by operating activities was $100.8 million compared with $148.2 million reported in the year-ago quarter.
For the third quarter of fiscal 2023, Take Two expects GAAP net revenues between $1.43 billion and $1.48 billion. The company expects a loss between 95 and 85 cents per share.
Net bookings are projected between $1.41 billion and $1.46 billion.
For fiscal 2023, Take-Two expects GAAP net revenues between $5.41 billion and $5.51 billion. The company expects a loss between $4.22 and $3.95 per share.
Net bookings are projected between $5.4 billion and $5.5 billion.
For fiscal 2023, net cash provided by operating activities is expected to be more than $630 million. Capital expenditures are expected to be approximately $150 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -60.29% due to these changes.
Currently, Take-Two has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Take-Two has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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