Take-Two Interactive (TTWO) reported mixed Q2 earnings on November 5 (the company doesn't operate on a calendar year), observes Frank Curzio, growth stock specialist and editor of Curzio Research Advisory.
EPS of $0.86 missed expectations by $0.35. Revenue was flat YoY at $957.5 million, but came in above estimates of $884.68 million. Management guided below estimates for Q3 and FY21, which it often does.
This isn't anything to worry about: TTWO continues to post incredible results from its flagship titles and brands — familiar titles such as NBA 2K21, Grand Theft Auto Online, Grand Theft Auto V, Red Dead Redemption 2, Red Dead Online, PGA Tour 2K21, and Mafia.
In addition, the company continues to generate more business from digital revenue and in-game purchases — digitally delivered net revenue grew 16% YoY to $711.3 million, accounting for 85% of revenue.
TTWO continues to look for mergers & acquisitions (M&A) deals. For instance, it announced it's buying U.K.-based racing game publisher Codemasters for a combination of cash and stock.
Yes, the coronavirus lockdowns pulled forward some demand as more people stayed at home. But going forward, TTWO has a lot of momentum. It continues to release updates on its best games. Plus, both Sony and Microsoft have new gaming consoles coming out this year: the new PlayStation and Xbox.
TTWO has a great management team and a rock-solid balance sheet, with over $2 billion in cash and zero debt. This allows TTWO to not only grow in new areas of gaming but also cross sell its other titles to Codemasters' user base. I see much more upside ahead.
