Take-Two sales and forecast undershoot Wall Street’s expectations, but the stock is doing fine

Take-Two Interactive Software Inc. reported and predicted softer sales than analysts expected Monday, but shares still gained while Wall Street awaits its acquisition of Zynga Inc. and acknowledges the video game publisher’s conservative forecast history.

Known for his “Grand Theft Auto” and “NBA 2K” titles, Take-Two TTWO,
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fourth-quarter net income was $ 111 million, or 95 cents a share, compared to $ 218.8 million, or $ 1.88 a share, last year. Revenue rose 11% to $ 930 million from $ 839.4 million in the quarter last year, while reserves rose to $ 845.8 million from $ 784.5 million. dollars from last year’s period.

Analysts had expected Take-Two to report fourth-quarter unadjusted earnings of 65 cents per share, adjusted earnings of $ 1 per share, $ 897 million in revenue and $ 882.6 million in reserves. Take-Two does not provide adjusted earnings information, but provides financial information that can be used to calculate the number.

For the current fiscal year, Take-Two executives expect earnings of $ 1.90 to $ 2.15 per share, revenue of $ 3.67 billion to $ 3.77 billion and reserves of $ 3 billion. $ 75 billion to $ 3.85 billion. Analysts had predicted GAAP earnings of $ 3.19 per share, revenue of $ 3.95 million and reserves of $ 4.15 million.

This forecast does not include Zynga ZNGA contributions.
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that Take-Two has agreed to acquire for $ 12.7 billion, an agreement that executives hope to close by the end of June; Also not included is interest expense on the debt that Take-Two has incurred to pay off Zynga’s deal. Analysts expect that the incorporation of the mobile gaming company will change the forecast for the year once it closes.

“Given the expected closing of the Zynga transaction and the autonomous take-Two orientation of fiscal year 23, it is likely to look similar to management’s internal budget as of S-4 presentation of 14 March 2022 (minus the additional interest expense on financing the debt related to the acquisition), neither the profits of 4QFY22 nor the outlook for management should be too surprising, “wrote MKM Partners CEO Eric Handler, in a preview of the report.

Handle also noted that Take-Two executives tend to offer conservative annual guidance.

“Our main projection is 2% higher than the internally budgeted view of management of $ 3.893 billion, a figure we consider conservative given that Take-Two’s year-end revenue has exceeded its initial target. at an average of 23% over the past six years, “he wrote, adding later,” our highest EPS estimate (6%) is a reflection of the company’s final EPA that exceeds its initial orientation at an average of 85% over the last six years “.

Shares gained 5% in overtime trading immediately after the results were released, after closing with a 0.2% gain at $ 110.11.

“In addition to our excellent financial results, I am pleased that we have taken key steps to position our long-term organization by investing in talent, further expanding our portfolio and agreeing on our pending transformation combination with Zynga, which has the potential to exponentially increase our net mobile reserves, while allowing us to offer substantial cost synergies and revenue opportunities, ”Take-Two CEO Strauss Zelnick said in a statement. Last quarter, Zelnick said the video game pandemic boom was over, while some analysts expect growth to slow considerably in 2022.

Reads: The video game pandemic boom is expected to end in 2022

For the first quarter, Take-Two expects earnings of 80 to 90 cents per share, revenue of $ 810 to $ 860 million and reserves of $ 700 to $ 750 million. Analysts expected, on average, GAAP earnings of 10 cents per share, revenue of $ 780.3 million and reserves of $ 796.2 million.

Last quarter, Take-Two’s Rockstar studio confirmed that development of the next iteration of “Grand Theft Auto,” apparently “GTA VI,” was beginning, which analysts have estimated could come out in the spring of 2023. “GTA V” is the highest-grossing entertainment title ever.

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