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Take-Two Interactive (TTWO) Slips 0.69% Ahead of Earnings: What To Watch

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Take-Two Interactive (TTWO - Free Report) saw its stock price slip slightly during regular trading hours Wednesday just one day before it is set to release its fiscal first-quarter 2019 financial results, which might signal that investors are worried about the video game firm. Yet, shares of TTWO are still up over 40% in the last year, so let’s see what we should really expect Thursday.

Take-Two expects its first-quarter net bookings to be in the range of $215 million to $265 million, driven by strength in Grand Theft Auto Online, Grand Theft Auto V, and NBA 2K18. The company is also in the midst of the inaugural season of its first esports league, which it started in partnership with the NBA. The NBA 2K league games can be streamed on Amazon’s (AMZN - Free Report) widely popular Twitch platform and highlights the growing importance of esports to gaming companies.

Rival Activision Blizzard (ATVI - Free Report) recently landed a deal with Disney (DIS - Free Report) for coverage of its Overwatch League. Furthermore, the global games market, made up of 2.3 billion gamers, is projected to climb by 13% in 2018 to hit $137.9 billion, based on an April Newzoo report. Meanwhile, the overall esports economy is expected to total $906 million in 2018, up from $696 million in 2017—with potential to hit $1.5 billion by 2020.

With all that said, Take-Two is projected to see its first-quarter revenues plummet by over 25% to hit $258.95 million. The firm is also expected to see its adjusted quarterly earnings fall 70% to $0.18 per share.

However, we still need to gauge how likely it is that TTWO can outperform its earnings estimate. Luckily we can turn to our exclusive Earnings ESP figure to do so.

Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Take-Two’s Most Accurate Estimate—the representation of the most recent analyst sentiment—is calling earnings of $0.14 per share, which is four cents worse than our current consensus estimate. This figure helps TTWO sport an Earnings ESP of -19.49% and a Zacks Rank #4 (Sell), which means there is a good chance Take-Two falls short of our quarterly earnings estimate.

But Take-Two follows Sony (SNE - Free Report) and Nintendo’s (NTDOY - Free Report) strong quarterly results and has topped its quarterly earnings estimates in the trailing 10 periods. 

Make sure to check back for our full analysis of Take-Two’s actual results after market close Thursday.

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