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Take Two (TTWO) to Report Q4 Earnings: What's in the Cards?

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Take Two Interactive (TTWO - Free Report) is set to report fourth-quarter fiscal 2021 results on May 18.

For the quarter, the company expects GAAP net revenues between $702 million and $752 million and GAAP earnings between 88 cents and 98 cents per share.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings has improved 4.6% to 68 cents per share over the past 30 days.

The consensus mark for revenues is pegged at $659.5 million, indicating a decline of 9.5% from the year-ago quarter.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 57.6%.

Will Portfolio Strength Aid the Top Line?

Take Two is expected to have benefited from the popularity of its franchises — Borderlands, Grand Theft Auto (GTA), Red Dead Redemption and NBA.

Additionally, coronavirus-led social distancing norms are expected to have been a major growth driver in increasing the number of active users in the to-be-reported quarter.

Notably, worldwide release of The Outer Worlds: Murder on Eridanos, the second and final story expansion for the award-winning and critically acclaimed sci-fi RPG is expected to have attracted users to the platform in the to-be-reported quarter.

Moreover, NBA 2K21, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Points mobile games, Borderlands 3, Sid Meier's Civilization VI and PGA Tour 2K21 are expected to have been the largest contributors to net bookings in the to-be-reported quarter.

However, lack of major game releases and updates in the to-be-reported quarter are expected to have hurt active user growth and net bookings, thereby affecting the top line in the fiscal fourth quarter.

The company expects net bookings between $602 million and $652 million in the fiscal fourth quarter.

Other Factors at Play

Strong video game spending is expected to have benefited Take-Two. Per Venturebeat, which cited NPD data, U.S. video game sales in January, February and March increased 42%, 35% and 18%, respectively.

Further, the company is expected to have benefited from growth in recurrent consumer spending (virtual currency, add-on content and in-game purchases, including the allocated value of virtual currency and add-on content incorporated in special editions of certain games).

However, the company faces stiff competition from the likes of Electronic Arts (EA - Free Report) , Nintendo (NTDOY - Free Report) , Zynga and Activision Blizzard (ATVI - Free Report) , apart from Tencent and Epic Games.

Activision’s Call of Duty: Black Ops 4, Call of Duty: Warzone and Call of Duty: Modern Warfare have been huge successes.

Nintendo’s Animal Crossing: New Horizons gained substantial popularity within a short span of time. Moreover, EA’s FIFA 21, Apex Legends, Need for Speed Hot Pursuit Remastered and Star Wars: Squadrons gained popularity during the quarter.

Further, increasing expenses toward game development and marketing are expected to have kept margins under pressure for this Zacks Rank #5 (Strong Sell) company in the to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Developments in Q4

On Mar 16, Take-Two division 2K announced that it has inked an exclusive long-term partnership with golf legend Tiger Woods. Moreover, 2K announced the acquisition of privately-held HB Studios, developers of PGA TOUR 2K21 and The Golf Club franchise.

On Mar 23, Take-Two’s 2K announced the acquisition of HookBang, LLC’s Austin-based video game division that will become part of Visual Concepts, the distinguished, wholly-owned studio and developer of NBA 2K video game franchise.

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