On Monday, Wolfe Research adjusted its price target for Take-Two (NASDAQ:TTWO) Interactive (NASDAQ:TTWO), a prominent video game company, reducing it to $180 from the previous $186. The firm maintained its Outperform rating on the stock.
The revision follows the company's third fiscal quarter of 2024 results, which aligned with or surpassed guidance, reporting revenue of $1.37 billion and net bookings of $1.34 billion. Earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $147 million, exceeding both the analyst's estimate of $98 million and the consensus of $106 million.
Despite these strong quarterly figures, Take-Two's outlook for the fourth fiscal quarter of 2024 and the full fiscal year 2025 has been revised downward, reflecting the costs associated with the company's commitment to producing high-quality games. The analyst noted that Take-Two's pursuit of "perfection" can lead to inevitable delays, specifically mentioning a slip in the release schedule for the Grand Theft Auto (GTA) series.
Wolfe Research emphasizes Take-Two's portfolio, describing it as "best-in-class" with "once-in-a-decade" hits that are expected to drive sustained earnings growth, assuming the company executes as anticipated. The firm's revised fiscal year 2026 estimates suggest a valuation of 18.5 times EBITDA and a free cash flow (FCF) yield of over 6%.
The report concludes with a reiteration of the Outperform rating, suggesting that there is potential for upside in the stock as net bookings increase and costs are effectively managed. Wolfe Research's stance indicates confidence in Take-Two's long-term performance despite the recent adjustment to the price target.
InvestingPro Insights
Take-Two Interactive (NASDAQ:TTWO) has been navigating a challenging landscape, as reflected in the recent price target adjustment by Wolfe Research. The InvestingPro data provides additional context to the company's financial health and market performance. As of the last twelve months ending Q3 2024, Take-Two Interactive has a market capitalization of $26.43 billion. Despite achieving an 11.64% revenue growth during this period, the company's profitability has been under pressure, with a negative P/E ratio of -18.08 and an adjusted P/E ratio of -60.18, indicating earnings challenges.
InvestingPro Tips for Take-Two Interactive highlight some critical factors for investors to consider. Analysts have revised their earnings expectations downwards for the upcoming period, which may have contributed to the company's negative earnings per share figures. Additionally, the company's short-term obligations currently exceed its liquid assets, suggesting potential liquidity risks. Nevertheless, analysts predict that Take-Two will return to profitability this year, offering a glimmer of hope for future financial stability.
Moreover, the company's EBITDA growth has been notable, with a substantial increase of 166.75% over the last twelve months as of Q3 2024. This growth may reflect the company's ability to manage its operational costs effectively, despite not being profitable over the same period. With a high return over the last decade, Take-Two's track record suggests resilience, although it does not pay dividends to shareholders, which could be a consideration for income-focused investors.
For those interested in a deeper analysis, there are additional InvestingPro Tips available for Take-Two Interactive. To explore these insights, which could further inform investment decisions, visit https://www.investing.com/pro/TTWO. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of actionable tips, including the company's valuation multiples and debt levels.
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