Take-Two Interactive: Operating Leverage Will Drive It Much Higher

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About: Take-Two Interactive Software, Inc. (TTWO), Includes: ATVI, EA, LGF.A
by: Kevin Berk
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Kevin Berk
Strategic growth investing, long/short equity, special situations

Have you seen this movie before? Let me tell you the plot:

  1. An entertainment company has great content…
  2. …but has inconsistent profitability…
  3. …and a stock price that has languished for years.
  4. Its stock runs up prior to release of its biggest franchise.
  5. The franchise outperforms everyone's wildest expectations.
  6. The stock sells off a bit and goes nowhere for months.
  7. Unexpected Twist: At some point, Carl Icahn, seeing no acquisition of the company, sells his large stake.

The company is… Lions Gate (LGF) in 2011-2012 up to the release of The Hunger Games. The Hollywood ending was that LGF was essentially flat for 5-6 months after The Hunger Games opened, but since August 2012, the stock has more