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Will Franchise Strength Drive Take Two's (TTWO) Q3 Earnings?
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Take Two Interactive Software Inc (TTWO - Free Report) is scheduled to report fiscal third-quarter 2018 results on Feb 7.
The company has beaten the Zack Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 105.10%.
Last quarter, the company reported earnings of $1.09, which beat the Zacks Consensus Estimate of 77 cents per share and increased 142.2% from the year-ago quarter.
Net bookings of $577 million easily topped the Zacks Consensus Estimate of $516.9 million and increased 20% on a year-over-year basis. We note that increasing digital revenues and strength in franchises are primarily responsible for this strong growth.
For the third quarter, the company expects net bookings to be in the band of $610–$660 million. The Zacks Consensus Estimate stands at $673 million.
Notably, shares of Take Two have gained 124.5% in the past year, significantly outperforming the industry’s 49.8% rally.
Factors at Play
Take Two’s popularity is primarily driven by its well-known franchises. The company expects continued strength in games like Grand Theft Auto (GTA) V, GTA Online, NBA 2K17& 2K18, Monster Legends and XCOM 2 to continue to fuel top-line growth.
In the third-quarter of fiscal 2018, which includes the important holiday season, Take Two released a number of new games.
In October, the much awaited WWE 2K18 was launched on PS4 and Xbox One, which garnered positive reviews.
In November, it launched new versions of L.A. Noire, the highly popular detective thriller game, on Nintendo Switch, PlayStation 4 and Xbox One. In December, the company also launched a rebuilt version for virtual reality and named it L.A. Noire: The VR Case Files for HTC Vive.
The quarter will also include the full sale of NBA 2K18 that was released on Sep 15, 2017. The Dec 12 launch of GTA Online: The Doomsday Heist is also noteworthy.
In fact, increased sales of the digital version of the games are adding to the company’s margins. Take-Two continues to expect growth in digital revenues driven by higher sales of full-game downloads and increase in recurrent consumer spending.
The company forayed into free-to-play games space with the acquisition of game developer, Social Point. The buyout is likely to boost its performance. Management expects Social Point to contribute 5% of total revenues in the current fiscal.
However, rising competition from the likes of Electronic Arts (EA - Free Report) , Activision Blizzard and Zynga remains a headwind. Also, increase in operating expenses due to higher acquisition costs as well as higher R&D expenses remain an overhang on the bottom line.
Take-Two Interactive Software, Inc. Price and EPS Surprise
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Take Two has a Zacks Rank #3 and its Earnings ESP is +1.93%. Therefore, the company is likely to deliver a positive surprise this quarter.
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Will Franchise Strength Drive Take Two's (TTWO) Q3 Earnings?
Take Two Interactive Software Inc (TTWO - Free Report) is scheduled to report fiscal third-quarter 2018 results on Feb 7.
The company has beaten the Zack Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 105.10%.
Last quarter, the company reported earnings of $1.09, which beat the Zacks Consensus Estimate of 77 cents per share and increased 142.2% from the year-ago quarter.
Net bookings of $577 million easily topped the Zacks Consensus Estimate of $516.9 million and increased 20% on a year-over-year basis. We note that increasing digital revenues and strength in franchises are primarily responsible for this strong growth.
For the third quarter, the company expects net bookings to be in the band of $610–$660 million. The Zacks Consensus Estimate stands at $673 million.
Notably, shares of Take Two have gained 124.5% in the past year, significantly outperforming the industry’s 49.8% rally.
Factors at Play
Take Two’s popularity is primarily driven by its well-known franchises. The company expects continued strength in games like Grand Theft Auto (GTA) V, GTA Online, NBA 2K17& 2K18, Monster Legends and XCOM 2 to continue to fuel top-line growth.
In the third-quarter of fiscal 2018, which includes the important holiday season, Take Two released a number of new games.
In October, the much awaited WWE 2K18 was launched on PS4 and Xbox One, which garnered positive reviews.
In November, it launched new versions of L.A. Noire, the highly popular detective thriller game, on Nintendo Switch, PlayStation 4 and Xbox One. In December, the company also launched a rebuilt version for virtual reality and named it L.A. Noire: The VR Case Files for HTC Vive.
The quarter will also include the full sale of NBA 2K18 that was released on Sep 15, 2017. The Dec 12 launch of GTA Online: The Doomsday Heist is also noteworthy.
In fact, increased sales of the digital version of the games are adding to the company’s margins. Take-Two continues to expect growth in digital revenues driven by higher sales of full-game downloads and increase in recurrent consumer spending.
The company forayed into free-to-play games space with the acquisition of game developer, Social Point. The buyout is likely to boost its performance. Management expects Social Point to contribute 5% of total revenues in the current fiscal.
However, rising competition from the likes of Electronic Arts (EA - Free Report) , Activision Blizzard and Zynga remains a headwind. Also, increase in operating expenses due to higher acquisition costs as well as higher R&D expenses remain an overhang on the bottom line.
Take-Two Interactive Software, Inc. Price and EPS Surprise
Take-Two Interactive Software, Inc. Price and EPS Surprise | Take-Two Interactive Software, Inc. Quote
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Take Two has a Zacks Rank #3 and its Earnings ESP is +1.93%. Therefore, the company is likely to deliver a positive surprise this quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>