After A Spectacular Quarter, Analyst Sees 35% Upside For Take Two

Take Two Interactive Software Inc (NASDAQ: TTWO) reported its second-quarter earnings after the close Tuesday with a revenue beat and strong guidance. But the Q2 report also included a net loss of $2.7 million due to reorganization expenses.

The Analyst

KeyBanc Capital Markets' Evan Wingren.

The Rating

Wingren maintains an Overweight rating on Take Two's stock and raised his price target from $119 to $144. (See Wingren's track record here.)

The Thesis

Take Two reported another "blowout" quarter Tuesday, mostly due to recurrent spending across multiple games, including "GTA Online" and "NBA 2K," the analyst said. Recurrent spending growth accelerated from 71 percent in the fiscal first quarter to 84 percent in the reported quarter. The ongoing momentum positions the company well to oversee a successful launch of "Red Dead Redemption 2," Wingren said. 
The video game maker's momentum in existing franchises combined with mobile growth creates a "favorable setup" at current levels, Wingren said. The analyst moved his 2018 EPS and revenue estimate higher from $2.65 per share and $1.8711 billion to $3.49 per share and $2.1271 billion. EPS and revenue estimates for 2019 were also moved higher from $5 per share and $3.1248 billion to $6.28 per share and $3.4753 billion.

Price Action

Shares of Take Two were trading higher by nearly 10 percent early Wednesday at $117, above the stock's prior 52-week high of $111.11.

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