Take-Two Slips After ‘Nothing New’ Quarter; EA Snaps Up Glu Mobile
(Bloomberg) -- Take-Two Interactive Software Inc. slipped in late trading after the video-game giant failed to impress investors with its latest results, which one analyst called “business as usual.”
Though Take-Two posted strong quarterly earnings and an upbeat forecast on Monday, the stock fell as much as 5.7% after the close. Its report coincided with rival Electronic Arts Inc.’s announcement of an agreement to buy Glu Mobile Inc. in a $2.1 billion deal.
Take-Two “just didn’t announce anything new,” Wedbush Securities analyst Michael Pachter said in an email. Investors want to hear about new titles from the company, which is relying on established games such as Grand Theft Auto. The report was “nothing bad,” he said, “just nothing new.”
EA, meanwhile, is on an acquisition spree. In addition to the Glu deal, it agreed to buy racing-games maker Codemasters in December. Take-Two had previously bid for that company Codemasters too.
Take-Two continues to look around for potential transactions, Chief Executive Officer Strauss Zelnick said in a phone interview Monday. With $2.7 billion in cash, “we are in a position to pursue any number of deals,” he said.
Take-Two’s shares climbed 70% in 2020, bolstered by an industrywide boom in video games.
Adjusted revenue will be $602 million to $652 million this quarter, Take-Two said in a statement, compared with an average Wall Street estimate of $585.1 million. It forecast at least 52 cents a share in earnings, excluding some items, well ahead of estimates.
While many competitors have said they’ve stopped seeing an impact from the Covid-19 lockdowns, Take-Two is still benefiting from the pandemic.
“We are continuing to see elevated engagement and sales from people sheltering in place,” the company said. Recurrent consumer spending -- a measure of how engaged customers are -- rose 30% in the quarter, twice what the company expected.
The company is growing quickly in China. NBA 2K Online in China increased 49% in the third quarter and is the No. 1 PC online sports game in the country -- with 51 million registered users. On Feb. 2, the company’s Private Division launched space simulation Kerbal Space Program on Tencent’s WeGame.
In the latest quarter, 56% of the company’s console games were delivered digitally, up from 44% a year ago -- bad news for brick-and-mortar retailers like GameStop Corp. This quarter, 73% of console game sales will be delivered digitally, Take-Two predicts, up from 63% last year.
Still, investors may be concerned about Take-Two’s “relatively aged portfolio,” said Doug Clinton, an analyst at Loup Ventures. There hasn’t been a new Grand Theft Auto since 2013, he noted.
“The numbers were strong, but the pressure to put out new titles is stronger than ever,” he said.
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