Take-Two Interactive Software: Worth a Second Look?

© Reuters. Take-Two Interactive Software: Worth a Second Look?

Take-Two (NASDAQ:TTWO) Interactive Software (TTWO) is a videogame developer that doesn't get as much respect as its bigger rivals, most notably Activision Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA).

Its pipeline of releases is not nearly as full, or ready for annual E3 Expos (one of the biggest video game events of the year).

Take-Two rather tends to play the long game, with big-budget titles such as Grand Theft Auto (GTA) and Red Dead Redemption (RDR). While not released as regularly, these tend to be multi-year needle-movers once they finally do launch. (See TTWO stock charts on TipRanks)

After a rather uneventful past few years, the stock has really been a drag. Despite a lack of visibility as to what to expect from Take-Two's next big title, I am bullish on the stock. Even more so now that TTWO stock is off over 29% from its all-time high.

More than just Grand Theft Auto

Take-Two is best-known for its Grand Theft Auto franchise. It's been nearly eight years since GTA V, though. And the top franchise is due for a truly next-generation refresh.

Take-Two has a knack for really polishing its titles before they're ready for release. In essence, the 2K symbol is a stamp of quality. So, don't expect the likes of a GTA VI to be rushed, even though I'm sure the fans are itching for a bit of clarity on a potential launch date.

We all know about the painful, buggy launch of CD Projekt's (OTGLY) Cyberpunk 2077. It's become an industry example of what not to do. That's why Take-Two's decision to keep gamers and investors (mostly) in the dark with respect to launch timelines is a wise idea, even if it means the stock has to endure a prolonged period of underperformance.

As such, when it comes to Take-Two, patience is key, whether you're an investor, or a gamer eagerly awaiting GTA VI.

TTWO is more than just its next GTA or RDR release. The company, like its peers, is still giving gamers and investors something to look forward to in the meantime.

GTA Online is still generating decent amounts of cash, despite its age, via DLC (downloadable content). That's a real testament to the type of long-lasting cash flows behind this franchise that doesn't age nearly as quickly as most other games.

Moreover, with annual NBA 2K releases, high-quality DLC, and other franchise-backed titles, such as Tiny Tina's Wonderlands, Take-Two is poised to keep moving forward, even in between GTA launches.

Wall Street's Take

According to TipRanks’ analyst rating consensus, TTWO stock comes in as a Strong Buy. Out of 16 analyst ratings, there are 13 Buy recommendations, and three Hold recommendations.

The average TTWO price target is $213.20. Analyst price targets range from a low of $180 per share to a high of $235 per share.

Bottom Line

Take-Two is a name you need to really be patient with. The company won't rush its bread-and-butter title in GTA.

The company has many other levers to keep sales growth on the uptrend. So, expect a slow and steady ascent until GTA VI's arrival can spark the next leg higher. At 27.4 times earnings, TTWO stock could prove to be a bargain for those with a long-term investment horizon.

Disclosure: At the time of publication, Joey Frenette owned a position in Activision Blizzard.

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