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Take Two (TTWO) to Report Q1 Earnings: What's in the Cards?

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Take Two Interactive (TTWO - Free Report) is set to report first-quarter fiscal 2022 results on Aug 2.

For the quarter, the company expects GAAP net revenues between $730 million and $780 million and GAAP earnings between $1 and $1.10 per share.

The Zacks Consensus Estimate for fiscal first-quarter earnings has improved 2.2% to 93 cents per share over the past 30 days.

The consensus mark for revenues is pegged at $678.5 million, indicating a decline of 31.8% from the year-ago quarter.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 63.4%.

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.

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 first quarter.

Nonetheless, 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.

This Zacks Rank #2 (Buy) company expects net bookings between $625 million and $675 million in the fiscal first quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Factors at Play

Steady video game spending is expected to have benefited Take-Two. Per Venturebeat, which cited NPD data, despite a slight dip of 2% in U.S. video game sales in April, consumer spend on video games increased 3% and 5% year over year in May and June, respectively.

The company is also 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 alongside EA’s FIFA 21, Apex Legends and Need for Speed Hot Pursuit Remastered.

Further, increasing expenses toward game development and marketing are expected to have kept margins under pressure in the to-be-reported quarter.

Key Developments in Q1

On Jun 2, Take-Two announced that it has acquired privately-held Nordeus for up to $378 million. The upfront price of $225 million comprised cash and $90 million in newly issued shares of Take-Two common stock.