• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Here Are the Take-Two Numbers That Should Garner Investor Interest

TTWO has a history of continuing its first day post-earnings move over the next three weeks.
By TIMOTHY COLLINS
Aug 06, 2019 | 02:12 PM EDT
Stocks quotes in this article: TTWO, GME, NERD

Take-Two Interactive's (TTWO) results give us a great look at not only the future of the gaming industry but also a part of it that may soon fade into memory. After Monday's closing bell the company announced results that absolutely destroyed expectations. TTWO pulled in earnings per share of $0.41 on revenue of $540.5 million in revenue, a 39% year-over-year increase. Wall Street expected a decline in revenue to $363.79 million with a scant two penny profit.

Moving forward, management predicts Q2 earnings of $1.04 to $1.14 per share on revenue in the range of $855 million to $905 million. Additionally, fiscal year 2020 results should be earnings of $3.71 to $3.96 per share on revenue between $2.83 billion to $2.93 billion. Back in May, the company projected its Fiscal Year 2020 results to include earnings of $3.39 to $3.65 per share on revenue of $2.7 billion to $2.8 billion, so yesterday's report and guidance pumped optimism into TTWO's shares.

Two metrics stuck out to me and I believe you'll find the commonality of it more and more as we review titles. The company is riding the wave of several franchises and the releases under those including NBA 2k19, Borderlands, Red Dead Redemption 2, Red Dead Online, GTA V, and GTA Online. What jumps out at me is those last two titles adding the word "online." These are huge franchises, especially GTA and its nine-figure until sale franchise. The more online is significant. Digitally delivered revenue increased 36% to $427.8 million while recurrent consumer spending increased 31% to $313.5 million. These are the numbers that should garner investor interest.

The move to digital delivery is fantastic for margins. What it's not good for is retailers, retailers like GameStop (GME) . With the advent of cloud gaming, and the potential for gaming without the use of an expensive console, a move online is key. If TTWO can begin to establish franchises like GTA, Red Dead Redemption, and eventually Borderlands into this model and have the gaming community enthusiastically accept it. The company should be able to ride this momentum for a multi-year cycle. Once we include the booming popularity of ESports, Take-Two should see secondary gains as ESports expand gaming competitions well beyond the small circle of popular games and Battle Royale style combat.

It can be difficult to chase a stock pushing higher by 9%, but Take-Two has a history of continuing its first day post-earnings move over the next three weeks. Over the past four years, which encompasses 16 earnings report, the stock has continued in the same direction of the first day close 13 times. A couple of the non-continuation moves were basically flat.

One way to play this would be a call spread that expires in 24 days on August 30th.

The Trade:

Buy to open August 30 $125 - $130 call spread at $2.50

Net Cost $250

Max Risk $250

Max Reward $250

Breakeven $127.50

Days until expiration: 24

Intrinsic value $90

This sets out a risk versus reward of roughly 1 to 1 with time fairly neutral over the next week although it will have to be watched closer to expiration. Given its history, I would say odds of a move higher outweigh lower by 3 to 1, but the overall market is suspect. Still, the odds of a move higher outweigh the odds of a move lower, so the trade off feels logical.

One other consideration for traders is using an ESports ETF like the Roundhill BITKRAFT ESports & Digital Entertainment ETF (NERD) . The current weighting of TTWO was 4.43% as of August 5th, so the stock will have some influence on performance, but the risk is fairly balanced across the top 10 holdings.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Timothy Collins had no position in the securities mentioned.

TAGS: Earnings | Investing | Options | Stocks | Technical Analysis | Trading | Digital Entertainment | Gaming | Stock of the Day

More from Investing

Bearish Bets: 2 NYSE Stocks You Should Consider Shorting This Week

Bob Lang
Jan 24, 2021 10:30 AM EST

These names are displaying both quantitative and technical deterioration.

Price Targets: How They Mislead and How They Can be Used

James "Rev Shark" DePorre
Jan 23, 2021 10:00 AM EST

The main problem with price targets is that they are a static number in a dynamic situation.

Stock Market Continues to Defy Conventional Wisdom

James "Rev Shark" DePorre
Jan 22, 2021 5:04 PM EST

Concerns about the action being overheated remain, but rotational action keeps the momentum going.

AMC Is a High Risk, High Reward Play

Timothy Collins
Jan 22, 2021 2:15 PM EST

Short and sweet: This is based on the high running emotions of the markets. There's little to it beyond that.

GoodRx Needs a Shot in the Arm to Improve Its Outlook

Bruce Kamich
Jan 22, 2021 2:03 PM EST

IPOs in recent months have done extremely well -- not so GDRX.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login