Take-Two (TTWO) Stock Is Under the Gun, But Oppenheimer Remains Bullish

You know there was some bad news with a company’s quarterly update when the stock tanks after the results are announced. That’s what happened Tuesday with Take-Two (TTWO). The video game giant’s shares fell nearly 14% after the announcement of its Q4 results before the market opened. Unfortunately, while the company crushed Wall Street’s sales and earnings estimates for the holiday quarter, its guidance was soft.

However, Oppenheimer’s Andrew Uerkwitz remains bullish on TTWO, with an Outperform rating and $135 price target, which implies an upside of 47% from current levels. (To watch Uerkwitz’s track record, click here)

Uerkwitz commented, “We believe 2019 and 2020 will be a significant turning point in the gaming industry. It has already started in slow motion and likely to continue over the next several years. Through it all, we believe content will be paramount, and here Take-Two stands out. As they say, content is king. First, we expect Rockstar to continue to launch games once every several years at similar scale to RDR/GTA. Long lead-time games become can’t miss events and allow for longtail revenue streams. Second, 2K and the Private Division remain under-appreciated in view of their promising future releases. The increasing strength in their content pipeline positions them well to take advantage of any new services that become available. TTWO notably takes a platform-agnostic approach and therefore makes it an ideal source of premium content for all video game distribution platforms and marketplaces.”

Bottom line: “We understand volatility is awash in this industry, but we believe since TakeTwo’s stock peaked in October last year, it is more likely that earnings estimates went up than down. Which means we have seen significant downward pressure on the earnings multiples. In our view, near-term risks such as overly optimistic recurring sales forecasts are likely priced in. We reiterate Take-Two as a best-in-class long-term Outperform.”

Most of the Street have not given up on the company just yet, as TipRanks analytics showcase TTWO as a Strong Buy. Out of 16 analysts polled in the last 3 months, 14 are bullish on Take-Two stock, while 2 remain sidelined. With a potential upside of 46%, the stock’s consensus target price stands at $134.80. (See TTWO’s price targets and analyst ratings on TipRanks)


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