February 8, 2018
In 2017, 2.2 billion video gamers were expected to generate a massive $108.9 billion in games revenue alone. Those massive numbers are only one reason I was following yesterday's earnings reports closely. One of my favorite video game developers released earnings yesterday, and it looks like they might have dropped us right into a great buying opportunity…
Based in New York City, Take-Two Interactive Software, Inc. (TTWO) is a leading developer of video games. The company develops and markets its products through Rockstar Games and 2K, its two wholly-owned labels. Take-Two Interactive Software's games can be used on personal computers, smartphones and tablets, as well as game consoles like PlayStation and Xbox.
Following the closing bell last night, Take-Two Interactive Software released earnings and sales results for its third quarter in fiscal year 2018. During the quarter, net bookings declined 12.2% year-over-year to $653.9 million, down from $744.82 million in the year ago period. Take-Two also reported that net income soared to $25.1 million, compared with a loss of $29.8 million in the same quarter a year ago. Adjusted earnings per share surged 27.3% year-over-year to $1.26, up from $0.99 per share in the same quarter a year ago. Analysts were expecting earnings of $0.98 per share on $663.83 in sales, so Take-Two posted a 28.6% earnings surprise and a 1.5% sales miss.
Looking forward to their fourth quarter in fiscal year 2018, Take-Two expects net bookings to range between $410 million and $460 million. That represents 0.70% to 13% annual sales growth, and is on the higher end of the current consensus estimate for $442.08 million in sales.
For the year, Take-Two is calling for earnings per share between $1.50 and $1.60, on net bookings between $1.99 billion and $2.04 billion. That is higher than their previous guidance for net bookings between $1.93 billion and $2.03 billion, and represents 4.7% to 7.4% annual sales growth for the full year.
Additionally, company management confirmed that the highly anticipated and twice delayed Red Dead Redemption 2 game will launch on October 26, 2018, as well as a new title from one of their largest franchises.
Given the sales miss and drop in annual sales growth, TTWO shares ticked lower after the announcement. But I fully expect the stock to bounce back as Wall Street digests the company's earnings growth and higher forward-looking guidance, which makes this moment an excellent buying opportunity.
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