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Take Two Interactive makes games for numerous devices including PlayStation 3 and PlayStation 2, Xbox 360, and Wii. It's games can also be played on handheld gaming systems such as DS, 3DS, and PlayStation Portable. As well as the Grand Theft Auto franchise the company makes several sports and role playing games. Take-Two Interactive was founded in 1993 and is headquartered in New York, New York.
TTWO Beats Estimates in Four of last Six Quarters
Dating back to the September 2011 quarter, TTWO has done a fair job of reporting earnings ahead of the Zacks Consensus Estimate. The four beats averaged 30% ahead of expectations and only one resulted in a lower stock price in the session following the earnings release.
The December 2012 quarter was the most recent report and delivered solid results on the top and bottom lines. Sales of $416M were 13% ahead of the Zacks Consensus Estimate. Earnings came in at $0.59, $0.09 better than the Zacks Consensus Estimate for an 18% positive earnings surprise. The stock moved higher by more than 15% in the session following the release
Two Misses Sandwiched Between 4 beats
The story here is not one of total positive earnings surprises. Two quarters in 2012 were big misses with the March 2012 quarter posting a bigger than expected loss of $0.72 for a 20% miss. The following quarter saw another bigger than expected loss of $1.24 or a 59% negative earnings surprise. The stock fell 13.8% following the June 2012 quarter, but rose 4.5% following the March miss.
In each of the two misses, the company reported lower than expected revenues as well.
Take Two Sees Estimates Moving Higher
Estimates for TTWO have been rising of late. The Zacks Consensus Estimate for 2013 for HLF stood at $0.52 as of September 2012. The consensus since moved higher to $1.22 in October 2012 and now stands at $1.70. That means that earnings expectations for TTWO have tripled over the last six months.
Due to the big losses in previous quarters, TTWO has negative earnings so the standard valuation tool of PE is not relevant. The industry average, however, carries a 13.8x trailing and 14.7x forward multiple. The price to book multiple for TTWO is 2.4x, and lower than the industry average of 2.8x. The price to sales multiple of 1.7x is well below the 2.4x industry average. On the whole, it seems that when the company returns to profitability it will have a decent amount of room to increase its multiples.
A quick look at the price and consensus chart shows while 2012 was a struggle, 2013 and 2014 earnings are headed in the right direction. The chart also shows the stock tracking the 2014 estimate line very closely over the last few months, an indication that investors are looking more towards future earnings than the debacle that was 2012.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio
Brian is also the editor of Follow The Money Trader a trading service that tracks institutional money flows and looks for great stock picks from that data.
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