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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Take-Two Interactive Software, Inc.    TTWO

TAKE-TWO INTERACTIVE SOFTWARE, INC.

(TTWO)
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A Common Foe as Videogame Stocks Stumble: 'Fortnite'

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02/06/2019 | 02:49pm EDT

By Sarah E. Needleman

Videogame stocks careened lower Wednesday after two of the industry's biggest publishers showed how difficult it is to escape the long shadow of "Fortnite."

Shares of Take-Two Interactive Software Inc. sank 14% after the company delivered an outlook for its current fiscal quarter that didn't meet Wall Street's expectations. Late Tuesday, Electronic Arts Inc. also disappointed Wall Street with its outlook; its stock was off 13% in afternoon trading.

Both Take-Two and EA reported higher profit for the latest quarter. For Take-Two, the share-price drop stung as the company had stellar sales of its long-awaited Western shooter game "Red Dead Redemption II," which has sold 23 million copies since its release in October.

The industry selloff Wednesday hit other big game makers. Activision Blizzard Inc. stumbled 11% and Ubisoft Entertainment SA fell 9.5%.

The market's harsh reaction underscores the increasingly cutthroat nature of the videogame industry. Players are spending the bulk of their time and money with a just handful of games -- a trend game companies have fostered themselves. They continually pump out new content to extend the life of their most valuable properties, generating sales of virtual goods along the way.

"You're seeing people spend more time in fewer games so competition for that time is increasing," KeyBanc analyst Evan Wingren said.

One name kept popping up on EA's and Take-Two's earnings calls: "Fortnite."

Its publisher, Epic Games Inc., said in November that the shooter game had 200 million players, up from 125 million in June. The popularity of the free, multiplayer game's battle-royale mode, in which 100 people compete in a match until one player or team is left standing, puts pressure on publishers that continue to sell their wares for the industry's standard price of around $60.

"It's very hard to compete with free," Jefferies analyst Tim O'Shea said. "It's not one game being completely crushed by 'Fortnite,' but in aggregate we're seeing the impact."

"Fortnite" has been troublesome for more than just videogame companies. Netflix Inc. last month told its shareholders that the game was an even bigger competitive threat than filmed-entertainment rival HBO. In January, people spent 124.8 million hours watching others play "Fortnite" on Amazon.com Inc.'s Twitch, more than any other game by a wide margin, according to Newzoo BV.

EA acknowledged the success of "Fortnite," telling analysts the game along with other big-budget holiday releases crimped sales of its "Battlefield V." EA had delayed the war shooter by four weeks to address feedback from early testers, but has put off adding a battle-royale mode until March. That decision hurt sales, Chief Executive Andrew Wilson told analysts.

In a surprise move Monday, EA launched without notice "Apex Legends," a free game in the same last-man-standing genre as "Fortnite." The game drew strong early numbers of players, though it is too soon to say if they are curiosity seekers or potential long-term customers.

Take-Two's earnings report Wednesday included guidance for the current fiscal fourth quarter that was more than $100 million shy of Wall Street's forecasts, according to several notes from analysts. Investors were likely anticipating a stronger outlook given the robust sales of "Red Dead II."

Chief Executive Strauss Zelnick dismissed the idea that "Fortnite" has had an impact on the sales of its games.

"I don't believe for a minute that our results when adequate, or results when they are less than great, are being influenced positively or negatively by another title in the marketplace," he told analysts. "If you have something great, people will show for it"

Take-Two added a battle-royale mode to an online multiplayer version of "Red Dead II" in early January, a little more than two months after the game launched.

Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD 1.78% 55.51 Delayed Quote.17.11%
ELECTRONIC ARTS INC. 0.71% 95.81 Delayed Quote.20.56%
TAKE-TWO INTERACTIVE SOFTWARE, INC. 0.30% 123.1 Delayed Quote.19.22%
UBISOFT ENTERTAINMENT -0.49% 56.42 Real-time Quote.-19.55%
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Financials (USD)
Sales 2020 2 777 M
EBIT 2020 618 M
Net income 2020 453 M
Finance 2020 2 148 M
Yield 2020 -
P/E ratio 2020 30,9x
P/E ratio 2021 36,4x
EV / Sales2020 3,97x
EV / Sales2021 3,78x
Capitalization 13 185 M
Chart TAKE-TWO INTERACTIVE SOFTWARE, INC.
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Technical analysis trends TAKE-TWO INTERACTIVE SOFTW
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 135,41  $
Last Close Price 123,10  $
Spread / Highest target 21,9%
Spread / Average Target 10,00%
Spread / Lowest Target -17,1%
EPS Revisions
Managers
NameTitle
Strauss H. Zelnick Chairman & Chief Executive Officer
Karl Slatoff President
Lainie Goldstein CFO & Principal Accounting Officer
Jon J. Moses Independent Director
Michael Dornemann Lead Independent Director
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