On Tuesday, JPMorgan adjusted its outlook on Take-Two (NASDAQ:TTWO) Interactive (NASDAQ:TTWO), reducing the price target from $200 to $195, while maintaining an Overweight rating on the stock. The revision follows a reassessment of the company's second quarter and fiscal year 2025 projections, setting them at the lower end of the guidance range.
This conservative adjustment was made despite raising future fiscal year 2026/27 estimates in light of recent announcements for upcoming games, including "Borderlands 4," "Mafia: The Old Country," and "Judas."
The firm's analysis indicates that Take-Two's mobile trends are performing well, as seen in the referenced figures. However, there is concern that NBA 2K's performance might not meet management's expectations, which predict steady recurrent consumer spending for the game.
The revised projections now estimate second-quarter bookings at $1,435 million, within the guided range of $1,420-$1,470 million, and fiscal year 2025 bookings at $5,575 million, compared to the guidance range of $5,550-$5,650 million.
Adjusted earnings per share (EPS) for the second quarter are projected at $0.37, which is in line with the implied guidance range of $0.35-$0.45. For fiscal year 2025, the adjusted EPS forecast is $2.40, against the guidance of $2.35-$2.60. The firm suggests that investors are prepared for a potentially muted second-quarter earnings report and the possibility of management adjusting the fiscal year 2025 guidance to the lower end of its range.
Despite these adjustments, JPMorgan remains optimistic about Take-Two's stock, particularly in anticipation of the Grand Theft Auto VI (GTA VI) release scheduled for Fall 2025.
The firm anticipates that the next significant catalyst for the stock will be the release of the second trailer for GTA VI, expected around Fall 2024, which typically occurs approximately one year before a game's launch. This will be followed by the announcement of the game's release date, pre-orders, and official gameplay footage as the release date approaches.
InvestingPro Insights
Take-Two Interactive 's financial landscape presents a mixed picture, as revealed by recent InvestingPro data. The company's market capitalization stands at $27.5 billion, reflecting its significant presence in the gaming industry. Despite JPMorgan's optimistic outlook, particularly regarding the upcoming Grand Theft Auto VI release, some financial metrics suggest caution.
According to InvestingPro Tips, Take-Two is currently not profitable over the last twelve months, which aligns with the negative P/E ratio of -7.05. This could explain JPMorgan's conservative adjustment of near-term projections. However, analysts predict the company will return to profitability this year, potentially supporting JPMorgan's maintained Overweight rating.
The company's revenue for the last twelve months was $5,403.1 million, with a slight decline of 2.33% year-over-year. This data point supports JPMorgan's observation about potentially muted earnings and the possibility of management adjusting fiscal year 2025 guidance to the lower end of its range.
On a positive note, Take-Two operates with a moderate level of debt, which could provide financial flexibility as it gears up for major game releases. Additionally, the company has delivered a high return over the last decade, suggesting a track record of long-term value creation that may justify investor optimism about future releases like GTA VI.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into Take-Two's financial health and market position.
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