Take-Two Might Be Worth A Second Look After Positive Q1 Results

Take-Two Might Be Worth A Second Look After Positive Q1 Results

Take-Two Interactive Software (NASDAQ: TTWO) reported strong first-quarter results in early August (for fiscal 2023), for the quarter ending on June 30, 2022. In this report, the company included an analysis of its recent acquisition of mobile gaming firm Zynga as well as its outlook for Q2 of fiscal 2023 (which ends September 30, 2022).

Analysts Give Take-Two Interactive a MODERATE BUY Rating

While the acquisition may have caused some disruption in Take-Two's trajectory, it seems that analysts believe the endgame will prove fruitful. After all, several dozen analysts providing an average price target for TTWO stock agree on a MODERATE BUY rating. As a matter of fact, a solid majority suggest a BUY, and only a handful suggest a HOLD at a ratio of 3:1:1 (Buy:Outperform:Hold)

Perhaps, most importantly, this is perfectly consistent over the past three months, even with the wrinkle caused by the Zynga (NASDAQ: ZNGA) acquisition, which will be discussed later. All that said, analysts have given TTWO stock an average price target estimate of $174.83. This is near the median of the range, which is $215 on the high side and $136 on the low.

Steady Growth and Target Beats

Overall, the new price target represents a +36.98 percent upside. This also remains consistent with the past three months, where the upside has been at least 24 percent. As a matter of fact, TTWO stock has beat the price target by at least 11 percent since the top of the year. The past few months, TTWO has beat the price target by more than 40 percent.

In terms of Earnings Per Share (EPS), TTWO has definitely consistently beat ratings for the past year, at least. For example, analysts gave a Q1 2021 range estimate of $0.74 to $1.00 with a consensus estimate of $0.89. The actual reported earnings of $1.01 definitely beat the estimate. The same is true in Q2 2021, where the range was $1.17 to $1.56 with a consensus estimate of $1.35 and a reported earnings $1.63.

The second half of the year it was more of the same with the Q3 2021 reported earnings of $1.32 not only beating the average estimate but also the high range estimate of $1.30. For the fourth quarter, though, the $1.09 reported earnings beat the consensus estimate of $1.01, but sat comfortably within the $0.85 to $1.35 estimated range.

Unfortunately, these numbers tell us that overall quarterly EPS growth is down -20.51 percent

Annual EPS Reveals Consistent Growth

When it comes to annual earnings, on the other hand, we see a more positive outlook. Overall, annual EPS growth is actually up +6.18 percent. While the quarterly numbers demonstrate a bit of up-and-down, the annual figures consistently beat not only the consensus estimate, but the whole range as well. For example, the 2018 forecast had a per share range of $4.68 to $5.00 with a consensus estimate of $4.80. The actual reported earnings of $4.83 barely squeaked past the range.

The numbers are better in 2019, when the forecast per share range was $4.57 to $5.09 with a consensus estimate of $4.71 and an actual reported earnings $5.32. In 2020 the margin increased when the reported earnings of $6.92 beat the range by more than $0.80.

2021 was the only year, actually, where the reported earnings did not beat the range of $4.73 to $5.35. Keep in mind, this is the year TTWO took the losses after the Zynga acquisition. However, the actual reported $5.06 EPS still beat the consensus estimate of $4.96

An Otherwise Good Year

As we look at where Take-Two can go over the next 12 months, it is important to remember that their growth is consistent, which is likely why the company felt this is a good time to scoop up a smaller company like Zynga. For example, in the most recent earning report, TakeTwo posted $1.1 billion in revenue, which is up 36 percent year-over-year. In addition, TTWO posted an impressive $1B in bookings, for the first quarter; which is also up 41 percent year-over-year.

In fact, there was only one major metric in which Take-Two did not see major growth. Indeed, the fiscal Q1 report indicated $104M in net losses. This might have come as a surprise when compared against the net profit of $152 million from approximately one year ago. That said, much of the downturn likely came out of the Zynga acquisition, which drove each of these figures, with roughly $117 million worth of acquisition costs driving the bottom line into the red.

Still, these numbers should be taken with a grain of salt as, again, analysts foresee that the slippage is merely a casualty of the Zynga acquisition, which should balance out in the near future.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Take-Two Interactive Software (TTWO)$137.04-0.3%N/A-20.06Moderate Buy$145.27
Zynga (ZNGA)$8.18flatN/A-81.80N/AN/A

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