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Take-Two Results Still Driven By Grand Theft Auto

Take-Two Interactive Software, Inc. TTWO 3.01% reported strong F1Q17 results. Management’s full-year guidance appears conservative, Baird’s Colin Sebastian said in a report. He maintained a Neutral rating on the company, while raising the price target from $37 to $43.

Take-Two reported its non-GAAP revenues at $272.6 million, ahead of the Baird estimate of $255.6 million. The beat was driven by continued strong performance of GTA V, which included record bookings for GTA Online, as well as NBA 2K, analyst Colin Sebastian mentioned. Growth in recurrent consumer spending also boosted the company’s quarterly performance.

EPS came in at ($0.34), marginally missing the Baird estimate, partly due to higher marketing expenses for Battleborn.

Digital Performance

Digital revenue grew 12 percent y/y to $172.1 million, while recurrent spending was up 18 percent y/y and represented 57 percent of digital net revenues. The performance was driven by continued strength in GTA Online, NBA2K16, and XCOM 2, Sebastian noted.

“Importantly, Take-Two's increasing mix of recurring revenues helps add visibility to overall financial performance, consistent with broader industry trends. Additionally, Take-Two's investments in Asia footprint continue to bear fruit, with NBA2K Online reaching over 32M registered users in China,” the analyst wrote.

Guidance Conservative

Management announced its GAAP net revenue guidance for FY17 at $1.75-$1.85 billion. Sebastian believes that the outlook reflects moderating GTA V performance and “somewhat modest unit expectations for upcoming releases NBA 2K17 (9/20 release) and Mafia III (10/7 release).”

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May 2016JefferiesMaintainsBuy
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