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Video game publisher Take-Two Interactive Software reported mixed results for its fiscal fourth quarter with a soft outlook for fiscal year. $TTWO was driven primarily by Red Dead Redemption 2, Grand Theft Auto Online and NBA 2K19.

Grand Theft Auto

TAKE-TWO INTERACTIVE SOFTWARE, INC - NASDAQ: TTWO

Reported Earnings After Close Monday

$0.78 Beat Exp $0.75 EPS BUT $488.4M Missed $506.6 million forecast in revenue

Earnings

Take-Two Interactive Software (TTWO) late Monday reported earnings for the fiscal fourth quarter and guided higher of an adjusted 78 cents a share on net bookings of $488.4 million in the quarter ended March 31. Analysts had expected Take Two earnings of 75 cents on bookings of $506 million. On a year-over-year basis, the company's net bookings rose 19%.

TAKE-TWO INTERACTIVE SOFTWARE, INC NASDAQ: TTWO

Market Reaction > After hours $98.30 −1.71 (-1.71%)

Highlights

Commenting on the fiscal outlook, CEO Strauss Zelnick said, “We expect fiscal 2020 to be another strong year for Take-Two, with operating results currently forecasted to be lower than fiscal 2019, due to the extraordinary success of Red Dead Redemption 2, and growing as compared to fiscal 2018.”

  • Big jump in software development and royalty (SDR) expenses to $111.59 million compared to $26.98 million in the prior year period.
  • Marketing expenses rose 63.5%
  • G&A expenses increased 25% all impacting earningsearnings.

In the first nine months of this year, Grand Theft Auto (25.1%) and Red Dead Redemption (35%) together contributed 60% of revenues to the company.

TTWO Q2 2019 earnings

Red Dead Redemption was an instant hit which should come as a big relief for the firm to reduce its dependency on the Grand Theft Auto franchise. Within three months after launch, the company sold 23 million units, surpassing analyst lifetime estimates for the game.

NBA 2K franchise has also been getting good traction with gamers. Jointly owned with NBA, the game was launched in May 2018 on the lines of a sports league format. Take-Two has announced that next season would see 21 teams participating which would augur well to bump up its revenues. This also would help the firm to grow its esports business in the near future.

A gaming stock's guidance is affected by the games they produce and when and with Take Two the money tree, “Grand Theft Auto Online”. 

Red Dead Redemption 2

Outlook

For the current quarter, Take Two expects to lose an adjusted 5 cents a share on net bookings of $335 million, based on the midpoint of its guidance. Wall Street had expected the company to earn an adjusted 42 cents a share on net bookings of $418 million.

For full-year 2020, Take Two guided to adjusted earnings per share of $3.88 on net bookings of $2.55 billion. Analysts were looking for adjusted earnings of $4.92 a share on net bookings of $2.77 billion this year. In the just-finished fiscal 2019, Take Two earnings were $4.83 a share on an adjusted basis on net bookings of $2.929 billion.

The next big game launch for Take Two will be Borderlands 3. The latest installment in the critically acclaimed "shooter-looter" game series is set to launch on Sept. 13. It will be available for Windows PCs and the PlayStation 4 and Xbox One consoles.

Kerbal Space Program: Breaking Ground is due for launch this month through its Private Division label. In addition, t in the pipeline for release in 2019: Ancestors: The Humankind Odyssey and The Outer Worlds.

What is impressive with $TTWO is both Grand Theft Auto V and Grand Theft Auto Online remain among the company biggest contributors nearly four years after they were first launched for Playstation 3 and Xbox 360. NBA 2K18, WWE 2K18, WWE SuperCard and Mafia III all were top contributors Red Dead Redemption 2 is an exciting addition for fiscal year 2019.

Grand Theft Auto V includes access to Grand Theft Auto Online, which initially launched in 2013. Rockstar Games is also known for developing brands in other genres, including the LA Noire, Bully and Manhunt franchises. Rockstar Games continues to expand on the company’s established franchises by developing sequels, offering downloadable add-on episodes, content and virtual currency, and releasing titles for smartphones and tablets.

Software titles published by the company’s Rockstar Games label are primarily internally developed. It expects Rockstar Games, its wholly-owned publisher of the Grand Theft Auto, Max Payne, Midnight Club, Red Dead, and other franchises, to continue to operate in the action/adventure product category and create groundbreaking entertainment by utilizing its existing titles, as well as developing new brands.

TTWO’s 2K label has published various entertainment properties across all key platforms and across a range of genres, including shooter, action, role-playing, strategy, sports and family/casual entertainment.

2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock, Mafia, Sid Meier's Civilization and XCOM Enemy Unknown series. 2K also publishes highly externally developed franchises, such as Borderlands and Evolve. 2K's realistic sports simulation titles, including the company’s primary NBA 2K series.

Source: TTWO, Alphastreet, 

From The TradersCommunity Research Desk

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