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Is a Beat in Store for Take-Two (TTWO) This Earnings Season?

We expect Take-Two Interactive Software Inc. TTWO to beat estimates when it reports fiscal second-quarter 2018 results on Nov 7.

What Our Model Says

Our proven model shows that Take Two is likely to beat on earnings because it has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Take-Two Interactive Software, Inc. Price and EPS Surprise

Take-Two Interactive Software, Inc. Price and EPS Surprise | Take-Two Interactive Software, Inc. Quote

Take Two carries a Zacks Rank #1. This combined with the company’s Earnings ESP of +5.69% makes us confident in looking for an earnings beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

The company expects to benefit from its popular offerings like GrandTheft Auto V and Grand Theft Autoonline (albeit sales are now slowing down), along with its other releases like NBA 2K18, XCOM 2: War of the Chosen. In fact, increased sales of the digital version of the games are adding to the company’s margins. Take-Two continues to expect growth in digital revenue driven by higher sales of full-game downloads and increase in recurrent consumer spending.

The company forayed into free-to-play games space with the acquisition of game developer, Social Point. The buyout is likely to boost its performance. Management expects Social Point to contribute 6% of total revenues in the current fiscal.

For the second quarter, the Zacks Consensus Estimate for earnings and revenues stands at 74 cents and $517 million respectively, up 64.4% and 23.1% from the second quarter fiscal 2017 actual figures.

However, increasing competition from the likes of Electronic Arts EA, Activision Blizzard ATVI and Zynga remains a headwind.

Another Stock to Consider

Here is a stock that, as per our model, also has the right combination of elements to post an earnings beat this quarter.

NVIDIA Corp. NVDA with an Earnings ESP of +0.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report

Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report

Electronic Arts Inc. (EA) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

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