Shares of Take Two Interactive (TTWO) continue to be a bargain in the highly beaten down video game sector. Recent events, including Carl Icahn's increasing stake and the pending launch of Grand Theft Auto V, set up a bullish opportunity. Along with these bullish trends, the company recently made an announcement that was hardly covered by the media, despite its possibility to post huge revenue.
Take Two announced that they will eventually combine all the cities from recent Grand Theft Auto games into one ultimate video game. Take Two subsidiary Rockstar Games wants to have all the cities available in one game, which should go over well with consumers. The head of Rockstar North Leslie Benzies had this to say, "Of course at some point we would like to have one big world containing all our cities and let the player fly between them and revisit their favorite areas."
A release of this super game would increase sales of old Grand Theft Auto library titles as gamers would go back and play the games to re-familiarize themselves. The game could also turn into the bestselling game in the franchise. Some people really liked one particular city, or are unwilling to give new games a try after not liking one city.
The combination of all the cities also sets Rockstar Games up for the possibility of new gaming models. It has been rumored on gaming message boards for years that a Grand Theft Auto MMORPG would be well received. The release of the combined cities game could be the beginning of this process, as the developers would recognize the revenue potential through monthly subscriptions or advertising sales.
Grand Theft Auto V is set to be released in spring of 2013. The game will be a huge seller and could easily approach the 25 million copies sold mark. Pre-sales have started on the highly anticipated game. The game has already been ordered 207, 616 times. The game is expected to top sales of previous games in the series. Here is a look at recent sales (from VGChartz.com):
· Grand Theft Auto: San Andreas (PS2) 20.81 million
· Grand Theft Auto: Vice City (PS2) 16.15 million
· Grand Theft Auto III (PS2) 13.1 million
· Grand Theft Auto IV (X360) 10.0 million
· Grand Theft Auto IV (PS3) 9.5 million
As you can see, the series has had numerous versions of the game sell over nine million copies. With the game now available on both Playstation and XBOX platforms, sales are likely to continue an upward trend.
Carl Icahn increased his stake in Take Two shares once again in November. When I last wrote about Icahn, he had a 11% stake. The famed activist investor now owns 12.9% of the company's shares, after a November 13th purchase. Icahn has not made his intentions clear, but his normal agenda is selling off assets or getting a company to put itself up for sale. Both of these events would benefit shareholders.
As mentioned before, 2013 is shaping up to be a blockbuster year for Take Two with the release of Grand Theft Auto V and Bioshock Infinite. Once thought to be a short term play on the success of these games or as a buyout target, I am now looking a couple years down the road. I believe the bullish trend will continue going forward as the Grand Theft Auto franchise is extended.
Take Two shares trade at $12.66, close to the mid-point of their fifty two week range ($7.37-$16.99). Shares are down over 8% for the year and over33% in a five year period. Since the last Grand Theft Auto major release, shares have been declining. Look for shares to gain steam going into the new year and consider buying at these levels. Analysts on Yahoo Finance predict the company to earn $2.25 per share in 2013, giving shares a forward price to earnings ratio of only 5.6.