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Why Is Take-Two (TTWO) Up 5.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Take-Two Interactive (TTWO). Shares have added about 5.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Take-Two Q2 Loss Widens Y/Y, Ad Revenues Decline

Take-Two Interactive Software reported second-quarter fiscal 2024 GAAP net loss of $3.20 per share, wider than a loss of $1.54 in the year-ago quarter. The Zacks Consensus Estimate for earnings was pegged at $1.02 per share.

Net revenues decreased 6.8% year over year to $1.3 billion.

Game revenues (86.9% of revenues) decreased 7.4% year over year to $1.1 billion. Advertising revenues (13.1% of revenues) decreased 2.3% year over year to $170.6 million.

Quarter Details

Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content, in-game purchases and advertising) decreased 9% year over year and accounted for 77% of total net revenues.

Top-line growth benefited from strong adoption titles, including NBA 2K24, Grand Theft Auto Online and Grand Theft Auto V, hyper-casual mobile portfolio, Toon Blast, Empires & Puzzles, Merge Dragons!, Red Dead Redemption 2 and Red Dead Online, Words With Friends and Toy Blast.

Take-Two’s gross profit decreased 38.9% year over year to $415.4 million. Reported gross margin was 32% compared with 48.8% reported in the year-ago quarter.

Operating expenses increased 2.9% year over year to $959.1 million.

Operating loss was $543.7 million compared with the year-ago quarter’s operating loss of $252.7 million.

Balance Sheet

As of Sep 30, 2023, Take-Two had $1.23 billion in cash, cash equivalents and short-term investments compared with $1.27 billion as of Jun 30, 2023.

The company had a debt of $3.08 billion as of Sep 30, which remained almost unchanged from Jun 30, 2023.

Guidance

For the third quarter of fiscal 2024, Take-Two expects GAAP net revenues between $1.29 billion and $1.34 billion. It expects a loss between 73 cents and 63 cents per share.

For fiscal 2024, the company expects GAAP net revenues between $5.37 billion and $5.47 billion. It expects a loss between $5.62 and $5.35 per share.

For fiscal 2024, net cash provided by operating activities is expected to be roughly $90 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 revision.

The consensus estimate has shifted -8.67% due to these changes.

VGM Scores

At this time, Take-Two has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

Outlook

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.

Performance of an Industry Player

Take-Two is part of the Zacks Toys - Games - Hobbies industry. Over the past month, Hasbro (HAS), a stock from the same industry, has gained 12.6%. The company reported its results for the quarter ended September 2023 more than a month ago.

Hasbro reported revenues of $1.5 billion in the last reported quarter, representing a year-over-year change of -10.3%. EPS of $1.64 for the same period compares with $1.42 a year ago.

Hasbro is expected to post earnings of $0.79 per share for the current quarter, representing a year-over-year change of -39.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -12%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Hasbro. Also, the stock has a VGM Score of B.

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Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report

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