Take Two Interactive Software Stock takes a step back

Shares of video game developer and publisher Take-Two Interactive Software (NASDAQ:TTWO) were bludgeoned in its recent Q2 2023 earnings report. Losses were bigger than expected, with 70% attributed to the weakness in its mobile business and $50 million in currency headwinds, as it collects 40% of its net revenue from overseas. This prompted the company to lower its expectations heading into a weak holiday shopping season, as its CEO Strauss Zelnick unabashedly declared, “We call it what we see it…”. It is important to note that Take-Two Interactive has many brand divisions, each responsible for its roster of video game titles, including Rockstar Games which manages the Grand Theft Auto series, Private Division, T2 Mobile Games, 2K which manages the sports titles and Zynga which is its acquired mobile subsidiary. Its most popular brand is Rockstar Games, which operates its most popular franchise in the Grand Theft Auto (GTA) series, followed by its western-themed Red Dead Redemption series.

The GTA V Metaverse

Its GTA V title was released in 2013, but the company has been able to milk it for over a decade as it powers its Grand Theft Auto online experience for consoles like Sony PlayStation 5 (NYSE:SNE) and Microsoft Xbox (NASDAQ: MSFT) and PCs with Advanced Micro Devices (NYSE: AMD) and NVIDIA (NASDAQ: NVDA) graphics processors. Rockstar built an interactive metaverse of outlaws and criminals even before Meta Platforms (NASDAQ: META) coined the term metaverse. The company has successfully reached its 100-day integration milestone for Zynga. Take-Two offers 87 game titles across mobile, PC, and console through fiscal year 2025.

Hacking attack

Take-Two received surprise publicity when a hacker claimed to have accessed a Rockstar (NYSE: CRM) employee’s Slack account to access GTA VI videos that were leaked onto the internet . This caused stocks to fall initially, but the market managed to drop. This is believed by many to be an old development video from 2017. The company has acknowledged that it was hacked and did not impact or hinder the development of GTA VI. More importantly, no source code was stolen.

The world is waiting for GTA VI

With the success of GTA V, the whole world is eagerly awaiting any news regarding the release date of GTA VI. GTA V has sold over 165 million copies worldwide since 2013. It is the highest grossing title in the series as Rockstar continues to provide a steady stream of patches, upgrades and DLC content to its GTA Online service. Microtransactions are executed using the purchase of Shark Cards and subscriptions for in-game currency. The company has given no indication of a release date which players believe is between 2023 and 2025. GTA VI is set to be its own metaverse with multiple playable characters, including a female main character. The announcement of the launch date will send stocks skyrocketing. This is the most important catalyst for the Society.

The pendulum swings completely from green to red

Take-Two shocked investors with its Q1 2023 fiscal report showing a surprise GAAP loss of (-$0.76) compared to analysts’ expectations for profit of $0.85, a shortfall (-1 $.61). On November 7, 2022, Take-Two released its fiscal second quarter 2023 results for the quarter ending September 2022. This was the first full quarter that includes Zynga’s financial performance since completing the acquisition of 12 .7 billion. The company reported a GAAP earnings per share (EPS) loss of ($-1.54) missing analyst estimates for a loss of ($0.82). Revenue rose 52.3% year-over-year (YoY) to $1.5 billion, beating analyst consensus estimates of $1.4 billion. Net bookings increased 53% to $1.5 billion. Net cash provided by operating activities for the six months ended September 30, 2022 was $155.4 million.

Take Two Interactive Software Stock takes a step back

Is surrender in the cards?

The TTWO weekly chart has formed a head and shoulders (HS) breakdown up to $173.30. Shares hit a low of $98.65, triggering a weekly market structure (MSL) breakout trigger on the rebound to $127.08. The weekly Stochastic peaked just below the 80 band and slid lower as the weekly 50-period exponential moving average (MA) led resistance down to $120.65, followed by the weekly MA over 50 periods dropping to $137.72. A weekly reverse cup and handle (CH) triggered on the breakdown through the $106.54 ‘lip’ support on high volume selling on the weak Q2 2023 earnings report and lower forecasts. This also caused the weekly Stochastic to shorten its bounce and reverse at the 40 band, forming a divergence top on the short-lived bounce as a new swing low forms at $90.00. The pullback support levels to watch are at $92.81, $90.00 after the profits, $84.41 and $80.54.

Prepare investors for more weakness

Take-Two CEO Strauss Zelnick said, “We posted another consecutive quarter of strong results, with net bookings of $1.5 billion, underscoring our ability to launch exciting new games and game updates. day of content in our portfolio. We continue to make excellent progress with our integration of Zynga, and we remain very optimistic about the vast long-term growth potential of the mobile industry, which is expected to reach over $160 billion in gross bookings over the next four coming years. He forecast lower due to the macro backdrop and currency swings against a strong US dollar. The company expects fiscal third-quarter net bookings to fall from $1.41 billion to $1.46 billion. It expects full-year bookings to be between $5.4 billion and $5.5 billion, down from the previous forecast of $5.8 billion to $5.9 billion. of dollars. Shares fell as much as (-12%) in the aftermarket following the downturn in the outlook.

Analysts remain firm but reduce price targets

Analysts did not give up hope on Take-Two, but they maintained their price targets. Wedbush stuck to its outperform rating but lowered its price target from $162 to $140. Analyst Michael Pachter pointed out that its mobile gaming issues will continue to linger for another quarter or two with the wildcard of a new hit game that could help beat its lowered top-end estimates. It adjusted its fiscal 2024 revenue forecast to $7 billion from $7.2 billion. Stifel analyst Drew Crum retained his buy rating but lowered Take-Two’s price target to $130 from $161 per share. Crum highlighted three transitory headwinds impacting Take-Two which are global economic headwinds, upcoming privacy changes in games, and reopening of businesses post COVID. All of these factors should subside over time. Bank of America (NYSE: BAC) upgraded Take-Two shares to a long neutral, but lowered its price target to $120 from $130.

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