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Take-Two Interactive (NASDAQ:TTWO) has been the bad boy of the video gaming industry and has been punished severely over the last year for its adulterous indiscretions in Grand Theft Auto and the options scandal. Since last June, the stock fell a whopping 70% to a low of $9 just two months ago. Since then, it has bounced back and gained over 50% and currently sits pretty at under $15. The rollercoaster ride encountered by TTWO is typical of small caps, specially those that get enveloped in scandals.

I believe that the stock has a lot more room to run. Here is why:

* For one thing, its GTA franchise still stands strong and is the yard stick against which others like Eidos and others are trying to measure up through ventures like Just Cause and Saints Row.
* Secondly, all eyes are currently on Electronic Arts (ERTS), which is getting great press from the likes of both Pat Dorsey of Morningstar and Jim Cramer. Meanwhile, TTWO has been left for the dead, with everyone still denouncing it. I like it because everyone hates it.
* Options scandal is over-rated. Currently, over 100 companies are being investigated for the same reason including ERTS and Activision (NASDAQ:ATVI).
* A new string of gaming consoles will be hitting the market over the next 6-12 months. Also XBox 360 is expected to be one of the top selling items this holiday season.
* Take Two has a lot of mega hit games out that will take market share from Electronic Arts including Oblivion, Prey, Midnight Club 3, Civilization IV and sports titles under its 2K Sports and Rockstar Games umbrella. I have played some of these games and I can tell you that NHL 2K7, Table Tennis and Top Spin 2 are incredibly addictive.
* While TTWO trades at a forward multiple of 25, ERTS and ATVI trade at 43 and 30 respectively.
* The company announced a delay in filing its 10-Q risking being delisted from Nasdaq, and the stock has still moved up despite the news.

$15 was a big level of support on the way down and it will take some strength for the stock to get above that level with conviction, but once it does, it will be a quick run to $17 and maybe even $20.

On the flip side, the stock is risky and volatility is its middle name, but for those who like to play with high risk/reward odds, this one could be a strong winner.

TTWO 1-yr chart:


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Source: Take a Second Look at Take-Two Interactive