Take-Two Interactive Software Inc. (NASDAQ:TTWO) is set to report FQ3 2014 earnings before the market opens on Monday, February 3rd. Take-Two is an American video game developer and publisher known for games produced by its 2 subsidiaries, Rockstar Games and 2k Games. Last quarter, Take-Two smashed analyst expectations mostly thanks to the success of Grand Theft Auto V (GTA V) which was released on September 17th, 2013. The game crushed single day sales records selling 11.21 million copies and generating $800 million revenue in the first 24 hours. GTA V features an online world where players may purchase micro transactions which could result in boosted residual revenue this quarter. Additionally holiday sales of GTA V and other TTWO titles have analysts expecting about 100% year-over-year revenue growth and nearly tripling FQ3 2013 profit.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for TTWO to report $1.41 EPS and $711.18M revenue while the current Estimize.com consensus from Buy Side and Independent contributing analysts is $1.49 EPS and $737.57M revenue. This quarter, the buy-side as represented by the Estimize.com community is expecting TTWO to beat the Street's expectations on profit and revenue by a considerable margin.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a large differential between the 2 groups' forecasts.
Over the previous 3 quarters for which we have data, the consensus from Estimize.com has been more accurate in forecasting profit and revenue 2 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The distribution of estimates published by analysts on the Estimize.com platform range from $1.40 to $1.73 EPS and $705.06M to $800.00M in revenues. This quarter we're seeing a smaller distribution of estimates for TTWO compared to last quarter.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrower distribution of estimates signaling more agreement in the market, which could mean less volatility post earnings.
Throughout the quarter, Wall Street raised its EPS forecast from $1.18 to $1.41 while the Estimize community lowered its consensus from $1.55 EPS to $1.49. Wall Street increased its revenue expectation from $609.13M to $711.18M while the Estimize revenue consensus fell from $737.39 to $737.59M. Timeliness is correlated with accuracy and we are seeing the two groups' forecasts converge at the end of the quarter.
The analyst with the highest estimate confidence rating this quarter is ChrisGuns521 who projects $1.41 EPS and $761.06M in revenue. This is ChrisGun521's first estimate of the Winter 2014 season, he is ranked 220th overall among over 3,700 contributing analysts. This quarter ChrisGuns521 expects TTWO to report inline with Wall Street on profit but exceed by a wide margin on revenue.
This quarter analysts on the Estimize.com platform are expecting TTWO to show a second consecutive quarter of better-than-expected earnings. In a time when holiday retail sales were down, analysts are expecting Take Two to perform well after demonstrating the enormous popularity and commercial success of recent titles such as Grand Theft Auto V.
Disclosure: No positions.