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Q2 Earnings Preview for Take-Two Interactive Software (NasdaqGS:TTWO)

in EARNINGS/INVESTING IDEAS by

Take-Two Interactive Software, Inc. (NasdaqGS:TTWO) is scheduled to report Q2 earnings results after markets close for trading on November 5, 2020.

The company is expected to report earnings of $1.54/share on revenue of $871.5 million. The consensus earnings per share (EPS) of $1.54/share is based on a poll of 6 analysts and represents a decline in eps of −23.2% over the same quarter last year, when the company reported earnings of $2.01/share.

The revenue forecast of $871.5 million based on a poll of 5 analysts implies a year-over-year (YoY) decline in revenue of −8.3%. Last year the company reported $950.5 million in revenue for the quarter.

Expected to report EPS contraction of −23.2% for Q2, 2021
Metric Expected Prior Year YoY Change
Revenue $871.48 $950.52 −8.3%
EPS $1.54 $2.01 −23.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter.

What are your expectations from Take-Two Interactive Software, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2021 $1.60 $2.30 43.7% Beat
Q4, 2020 $0.89 $1.50 67.3% Beat
Q3, 2020 $1.75 $1.70 −2.9% Missed
Q2, 2020 $1.70 $2.01 18.1% Beat
Q1, 2020 $0.04 $0.27 647.6% Beat
Q4, 2019 $0.74 $0.78 5.8% Beat
Q3, 2019 $2.80 $2.90 3.6% Beat
Q2, 2019 $0.93 $1.05 13.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 8.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $164.02 $177.52 8.2% Increase
May 20, 2020 $142.24 $138.19 −2.8% Decline
February 6, 2020 $120.76 $112.60 −6.8% Decline
November 7, 2019 $116.68 $116.96 0.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.35, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.35 implies a 0.9% chance of earnings manipulation.

Fundamentals And Technical Analysis

Take-Two Interactive Software, Inc. is currently trading at $165.46/share, down −1.1% for the day. The company is trading at approximately 92.1% of its 52-week high of $180.61/share. The company’s stock price is down −6.8% since the last earnings report and up 0.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 59.30 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:TTWO Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 40.20 and a forward P/E multiple of 32.27.

Take-Two Interactive Software, Inc.’s current share price also implies a price-to-book (P/B) multiple of 6.77. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2021.Q1
Period End Date June 30, 2020
Stock Price (Current) $165.46
P/E Ratio 40.2x
P/E Ratio (Fwd) 32.3x
PEG Ratio 0.9
Total Debt / Total Capital 1.0%
Levered Free Cash Flow $970.2 million
EV / EBITDA 29.1x

Finbox

Take-Two Interactive Software, Inc. is a large-cap stock with a market capitalization of $18.206 billion and a total enterprise value of $16.102 billion. The company operates in the Communication Services sector and the Entertainment industry.

Take-Two Interactive Software, Inc. develops, publishes, and markets interactive entertainment solutions for consumers worldwide. The company offers its products under the Rockstar Games and 2K labels, as well as under Private Division and Social Point labels. It develops and publishes action/adventure products under the Grand Theft Auto, Max Payne, Midnight Club, and Red Dead Redemption names; and offers episodes, content, and virtual currency. The company also develops brands in other genres, including the LA Noire, Bully, and Manhunt franchises. In addition, the company publishes various entertainment properties across various platforms and a range of genres, such as shooter, action, role-playing, strategy, sports, and family/casual entertainment under the BioShock, Mafia, Sid Meier’s Civilization, XCOM series, and Borderlands. Further, it publishes sports simulation titles comprising NBA 2K series, a basketball video game; the WWE 2K professional wrestling series. It also offers Kerbal Space Program, The Outer Worlds, Ancestors the Humankind Odyssey under Private Division. Additionally, the company offers free-to-play mobile games, such as Dragon City and Monster Legends. Its products are designed for console gaming systems, including Sony’s PlayStation 4; Microsoft’s Xbox One; the Nintendo Switch; and personal computers comprising smartphones and tablets. The company provides its products through physical retail, digital download, online platforms, and cloud streaming services. Take-Two Interactive Software, Inc. was founded in 1993 and is headquartered in New York, New York.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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