Take Two (TTWO) Q1 Earnings: Is Disappointment in Store?

Take-Two Interactive Software, Inc. Price and EPS Surprise | Take-Two Interactive Software, Inc. Quote

A Look at Key Factors

Take Two is expected to benefit from higher recurring spending on its popular game offerings. Notably, recurrent consumer spending in fiscal 2018 increased record 48% and also accounted for 48% of total net bookings.

Additionally, the company’s approach to derive revenues from its growing digital platform (67% of revenues in fiscal 2018) bodes well. The reliance on digital content delivery helps Take Two to be cost efficient compared to physical content delivery.

Grand Theft Auto Online, Grand Theft Auto V, NBA 2K franchise and WWE series are expected to drive user engagement and recurrent spending with Take Two’s continuous efforts to bring in new content and features.

Take Two’s acquisition of game developer, Social Point, which enabled the company to foray into free-to-play games space, contributed to two months revenue in the last reported quarter.

However, the lack of new titles launches for this quarter are likely to have a negative impact on its revenues and earnings.

Rising competition from the likes of Electronic Arts EA, Activision Blizzard ATVI and Fortnite remains a headwind. Also, increase in operating expenses due to higher acquisition costs as well as higher marketing and R&D expenses remain an overhang on the bottom line.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Take Two has a Zacks Rank #4 and an Earnings ESP of -19.49%, which indicates an unlikely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here is a company that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:

Penn National Gaming PENN has a Zacks Rank #1 and Earnings ESP of +2.03%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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