Back to top

Image: Bigstock

Why Is Take-Two (TTWO) Down 1.4% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Take-Two Interactive (TTWO - Free Report) . Shares have lost about 1.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Take-Two due for a breakout? 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’s Q4 Earnings Decline Y/Y, Revenues Rise

Take Two Interactive Software reported fourth-quarter fiscal 2022 earnings of 95 cents per share, down 49.5% year over year.

Net revenues increased 4.9% year over year to $903.3 million. Net bookings increased 7.8% to $845.8 million.

The Zacks Consensus Estimate for earnings and revenues was pegged at $1.01 per share and $873 million, respectively.

NBA 2K22, Grand Theft Auto (GTA) Online and GTA V, Tiny Tina's Wonderlands, WWE 2K22, Red Dead Redemption 2 and Red Dead Online, Top Eleven, Two Dots, and GTA: The Trilogy - The Definitive Edition were the biggest contributors to the company’s fourth-quarter fiscal 2022 top line.

Digital revenues (89.6% of revenues) improved 8.5% year over year to $833.3 million.  Physical retail and other segment revenues (10.4% of revenues) increased 35.3% year over year to $96.7 million.

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) increased 1% year over year and accounted for 63% of total net revenues.

Net bookings from recurrent consumer spending decreased 6% year over year and accounted for 60% of total net bookings.

On Jan 9, 2022 Take-Two entered into a definitive agreement under which Take-Two will acquire all the outstanding shares of Zynga. The transaction, which is anticipated to close on May 23, 2022, is subject to the approval of both Take-Two and Zynga stockholders and the satisfaction of other customary closing conditions.

Top-Line Details

Region-wise, revenues from the United States (59.9% of revenues) increased 8.5% year over year to $557.3 million. International revenues (40.1% of revenues) increased 14.4% year over year to $372.7 million.

On the basis of platforms, revenues from console (71.5% of revenues) increased 9.3% year over year to $664.8 million. Revenues from PC and other (17.5% of revenues) increased 14.6% year over year to $163 million. Revenues from mobile (11% of revenues) increased 14.5% year over year to $102.3 million.

Operating Details

Take Two’s gross profit decreased 5.1% year over year to $531.4 million. Reported gross margin of 58.8% contracted 620 basis points on a year-over-year basis.

Operating expenses increased 32.4% year over year to $402.5 million.

Operating income came in at $128.9 million, plunging 49.5% year over year. The operating margin was 14.3% compared with the year-ago quarter’s 29.6%.

Balance Sheet

As of Mar 31, 2022, Take Two had $2.55 billion in cash, cash equivalents and short-term investments compared with $2.73 billion as of Dec 31, 2021.

Guidance

For the first quarter of fiscal 2023, Take Two expects GAAP net revenues between $810 million and $860 million. The company expects earnings between 80 and 90 cents per share.

Net bookings are projected between $700 million and $750 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -24.67% due to these changes.

VGM Scores

At this time, Take-Two has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Take-Two Interactive Software, Inc. (TTWO) - free report >>

Published in