The excitement in the gaming world is growing by leaps and bounds after the surprising doubling in Xbox sales with the $399 option and the holiday games lineup.
It may not be as good a reason to own Microsoft (MSFT), although it sure would be if it were spun off. But people are, correctly, flocking to GamesStop (GME) and Electronic Arts (EA) as beneficiaries. GameStop got hurt badly during a transition that was poorly telegraphed by a management. I happen to like Paul Raines, the CEO, who was abject in not getting it right the first time but terrific in coming back on "Mad Money" and saying that the all-clear's been sounded even as it has taken three months since he said that to make some money here.
No matter, the one that's not up enough is the one that I think is going to have a terrific second half of the year: Take-Two Interactive (TTWO). The stock's rallying nice today, putting on almost 3% today and up 30% for the year.
But I think that there's much more in store given that the maker of "Grand Theft Auto" has a title list upcoming that could be chock full of hits, including one, Evolve, that might actually become a major hit although not in the league of GTA, which is the greatest of all time.
When I pulled up with CEO Strauss Zelnick he was unusually sanguine about the fall lineup. He's not a showboat who overpromises, which certainly keeps him from under-delivering, but Evolve's got fantastic word of mouth and in gaming circles that's all that matters.
Now here's what's tricky at TTWO. It is not a loved stock among all analysts and the most vocal ones tend to really put the knock on it, even when it is good. The company reports on August 5 and last time reported a darned good quarter and got hammered anyway. It was a terrific opportunity to buy a company with a boatload of cash and lots of products in the pipe that can be almost an annuity stream for this $2.2 billion company, with almost 30% of that market cap in cash.
I think that given that Evolve still isn't in the stores and we don't know how much Xbox sales fall to the bottom line and how much the company will do in digital, the negative analysts might just crush it again.
If it comes in I would buy half a position and then buy the rest after what could be the usual hostile crowd.
Why buy any ahead of August 5 at all? Simple. The negative analysts have been so wrong that one of them might just have to break ranks just to stay real.
Zelnick's done a masterful job turning the company around and has also learned to harness the power of 1,900 employees and designers who come up with these games. I think this is now the best of the gaming stocks out there given its cash, its management and its low expectations going into the quarter.