Take-Two Interactive Software (NASDAQ:TTWO) is leading big videogame stocks Friday, up 2.2% as MoffettNathanson upgrades to Outperform, expecting a strong new content cycle is getting ready to launch.
“We’re very nearly in the teeth of the timeline of production that Take-Two has been pointing to for several years,” analyst Clay Griffin said.
That will set up a "future that should catalyze upward estimate revisions and multiple expansion," he added.
It's "only reasonable" to expect some major announcements, with capitalized software on Take-Two's balance sheet surging close to $1B.
He's set a $140 price target (implying 23% upside), based on a multi-year discounted cash flow approach accounting for the "burden" of stock-based compensation, and assuming 9% cost of capital and 2% terminal growth rate - accounting for multiple expansion he expects "as more and more clarity and detail about the slate comes to the foreground."
This month, Bernstein noted that warnings at Ubisoft highlighting the power of franchise games bodes well for the likes of EA and Take-Two.