Take-Two slumps on 'call it like we see it' outlook on videogame business
Take-Two Interactive Software (NASDAQ:TTWO) shares fell as much as 12% Tuesday as the company did about the worst thing a videogame publisher can do at this time of the year: Give a weak Christmas and holiday season sales outlook.
On Monday, Take-Two (TTWO) said that for the final three months of 2022, it expects net bookings to be in a range of $1.41B to $1.46B, and that factors such as weak mobile business and the strength of the U.S. dollar will result in bookings for all of 2022 of $5.4B to $5.5B.
That outlook is unfortunate, as it is lower than Take-Two's (TTWO) earlier forecast for bookings of $5.8B to $5.9B for the quarter. And as videogame companies look for the holiday season to provide a sales windfall from consumers looking to complete their gift lists, Take-Two's (TTWO) outlook appears particularly ominous.
Take-Two (TTWO) Chief Executive Strauss Zelnick didn't try to sugarcoat the situation. Speaking on a conference call late Monday, Zelnick said, "We call it like we see it, and I think we are known for that."
Along with its outlook, Take-Two (TTWO) also said that for its fiscal second quarter, it earned $1.54 a share, on $1.4B in revenue, both of which fell short of prior expectations.
"Had we expected where we were right now, then we wouldn't be guiding down," Zelnick said. "We're guiding down because things have materialized in a way that's different than our expectations."
Wedbush analyst Michael Pachter left his outperform rating on Take-Two's (TTWO) stock, but cut his price target to $140 a share from $162. Pachter said that Take-Two's (TTWO) mobile game issues "should persist for at least another quarter or two," but a new hit game in the next year or two should help the company exceed his own lowered revenue estimates.
Pachter now expects Take-Two (TTWO) to hit revenue of $7B for its 2024 fiscal year, compared to his earlier forecast of $7.2B.
At Stifel, analyst Drew Crum made no change to his buy rating on Take-Two (TTWO), but cut his price target to $130 a share from $161. Crum said there are "three elements" working against Take-Two (TTWO) at the present time.
According to Crum, those "elements" as businesses reopening as the Covid pandemic fades, the overall state of the economy, and privacy changes coming to games, apps and people's personal information. Crum said the gaming industry is largely through the reopening issues, inflation will correct itself, and that there is "more skepticism" about the privacy change matter.
However, Crum said, "We believe [videogame] publishers can solve this over time."
Separately, Zelnick said in an interview with CNBC that he had no major concerns related to Microsoft's (MSFT) ongoing $69B acquisition of gaming rival Activision Blizzard (ATVI).