Could TTWO Stock Hit New Highs Despite Earnings Miss?
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Shares of Take-Two Interactive (NASDAQ:TTWO) climbed about 1% during Thursday’s trading session. Of course, the rise in the PowerShares QQQ ETF (NASDAQ:QQQ) gave a hand to its rise, as did some positive video game data. But TTWO stock is really flying in the after hours after reporting earnings for its first fiscal quarter of 2019.
The company reported GAAP earnings of 62 cents per share, which was two pennies shy of analysts’ estimates. However, net bookings of $288.3 million came in almost 11% ahead of estimates.
Being that bookings is the main metric used when evaluating TTWO stock, this has sent shares flying, up more than 12% overall. However, Electronic Arts (NASDAQ:EA) did not report great earnings in July and Activision Blizzard (NASDAQ:ATVI) was down slightly Thursday, after it reported its earnings.
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TTWO Stock Earnings
Net income for the quarter rose to $71.7 million, up almost 20% from last year’s $60.3 million. Guidance for next quarter calls for earnings per share of 43 cents to 53 cents, while net bookings guidance of $500 million to $550 million came up well short of consensus estimates of $581.5 million.
However, for the balance of the year, TTWO didn’t do too bad. Bookings guidance came in at $2.7 billion to $2.8 billion vs. consensus estimates of $2.74 billion. GAAP earnings guidance of $1.45 to $1.70 per share did come up short of the $2.04 estimate, though.
From Chairman and CEO Strauss Zelnick:
“This performance was driven by better-than-expected recurrent consumer spending on Grand Theft Auto Online and NBA 2K18, as well as robust ongoing demand for Grand Theft Auto V, which is now approaching 100 million units sold-in to date. Accordingly, we are increasing our operating outlook for fiscal year 2019.”
According to the most recent data, video game sales continue to climb. Overall sales (including software, consoles and accessories) are now up 17% on the year, while TTWO’s Grand Theft Auto V continues to hold a top-three spot among gamers. Meanwhile, the company’s NBA 2K18 just sold its 10 millionth copy, becoming the best-selling game in the 2K franchise.
That bodes well for Take-Two, as NBA 2K19 will be released later this year, as will the long-awaited Red Dead Redemption 2. Both games, along with Grand Theft Auto, should continue to drive strong results into year-end 2018, particularly with such a strong economic backdrop. The strong economy and an increasing age demographic are two driving forces in the video game stock thesis.