Take-Two Interactive Sees Lower 4Q Digital Delivery Bookings; Shares Slip 4%

Take-Two Interactive Software stock dropped 4% in Tuesday’s pre-market trading session after the video game company forecasted a decline in 4Q net bookings, due to lower digital delivery net bookings.

In the third quarter ending Dec. 31, 2020, Take-Two Interactive’s (TTWO) earnings and net bookings beat analysts’ estimates. The company’s 3Q earnings of $1.57 per share topped the Street’s estimates of $1.27 per share and grew 10% year-over-year. Revenue declined 7.4% to $860.9 million year-over-year, as net bookings fell 8.3% to $814.3 million but topped the Street consensus of $752.8 million.

For the fourth quarter, Take-Two Interactive expects EPS of $0.88-$0.98 per share on revenue in the range of $702-$752 million.

Fourth-quarter net bookings are forecasted to land between $602-652 million, versus net bookings of $729 million in the year-ago period. The company expects digital delivery net bookings to decline approximately 10% in 4Q.

Furthermore, Take-Two Interactive raised its 2021 fiscal outlook. Take-Two Interactive expects to generate sales in the range of $3.235-$3.285 billion, up from the prior guidance of $3.05 to $3.15 billion. The company sees fiscal 2021 earnings in the range of $4.08 to $4.18 per share, compared to the previous guidance of $3.22 to $3.49 per share.

Net booking is are expected to be in the range of $3.37-$3.42 billion, up from the previous guidance of $3.15-$3.25 billion. The company said that the bookings outlook for fiscal 2021 improved primarily due to higher recurrent consumer spending from mobile games like Grand Theft Auto Online, NBA 2K21, Grand Theft Auto V, and Red Dead Redemption 2. (See Take-Two Interactive stock analysis on TipRanks).

Following the earnings results, Wells Fargo analyst Brian Fitzgerald raised the stock’s price target to $235 (10.2% upside potential) from $205 and maintained a Buy rating.

In a note to investors, the analyst said, “We maintain our bullish stance on TTWO despite the stock’s run up since FQ2.” He believes that “TTWO’s premium multiple is justified” and views “a pullback in the stock as a buying opportunity ahead of what appears to be a prolific FY22-FY25 pipeline.”

Overall, the Street has a cautiously optimistic outlook on the stock with a Moderate Buy analyst consensus based on 8 Buys and 7 Holds. The average analyst price target of $214.15 implies that the shares are fully priced at current levels. That’s after shares gained 89.5% over the past year.

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