Take-Two Interactive Hits 52-Week High, Fueled By GTA 6 Release Optimism, AI Integration

Take-Two Interactive Software, Inc.'s (NASDAQ: TTWO) stock price reached a new 52-week high on Monday after Benchmark raised its price target on the stock from $163.00 to $200.00.

According to Benchmark analyst Mike Hickey, "Take-Two faces low execution risks in fiscal 2H 2024," and the release of the highly anticipated GTA 6 is expected to drive enthusiasm and growth, benefiting current Rockstar titles and live services like "Grand Theft Auto Online" and "Red Dead Redemption 2."

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Benchmark acknowledges the company's strategic use of AI technology, stating: "The company is also poised to leverage AI technology, potentially enhancing game quality, and reducing costs."

The note also highlights Take-Two's growth opportunities in the direct-to-consumer (D2C) market, citing legal challenges to Apple Inc (NASDAQ: AAPL) and Alphabet Inc.'s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google's app store control as a chance for TTWO to thrive.

"Lower transaction fees and more distribution options position TTWO to thrive in a more open mobile gaming market, boosting its revenue and innovation," the note adds. The analyst anticipates that shifting 25% of revenue to the D2C model could result in an incremental increase of $1.00 in AEPS.

Moreover, Benchmark notes the recent restructuring at 31st Union, a 2K-owned studio, with fewer than 10 layoffs but continued recruitment for key roles. The financial guidance for F3Q24 and FY24, including net bookings and AEPS, is in line with consensus estimates.

In terms of valuation, Benchmark estimates a normalized EPS of $7.88 over FY25|FY26, reiterating a Buy rating for TTWO. The note underscores the company's strong financial position, with cash of $0.8 billion and $3.1 billion in debt.

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