Why Is Take-Two (TTWO) Up 6.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Take-Two Interactive (TTWO). Shares have added about 6.1% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Take-Two due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Take-Two's Q2 Loss Narrows Year Over Year, Revenues IncreaseTake-Two Interactive Software incurred second-quarter fiscal 2025 GAAP net loss of $2.08 per share, narrower than a loss of $3.20 reported in the year-ago quarter.The Zacks Consensus Estimate for earnings was pegged at 66 cents per share.GAAP net revenues increased 4.1% year over year to $1.35 billion. The Zacks Consensus Estimate for revenues was pegged at $1.47 billion.Revenues from the United States increased 2.4% year over year to $814.5 million and accounted for 60.2% of GAAP net revenues. The rest came from international, revenues of which increased 6.9% year over year to $538.6 million.Game revenues (91.2% of total revenues) rose 9.3% year over year to $1.23 billion. Advertising revenues (8.8% of total revenues) plunged 30.1% year over year to $119.2 million.Bookings improved 2.1% year over year to $1.47 billion, driven by the continued success of the Grand Theft Auto and Borderlands franchises. Bookings from the United States decreased 0.2% year over year to $914.4 million and accounted for 62% of GAAP bookings. The rest came from international, bookings from which increased 5.9% year over year to $560.5 million.Quarter DetailsRecurrent consumer spending rose 6% for the period, which was slightly above the company’s guidance of 5% and accounted for 81% of Net Bookings. Mobile increased high-single-digits, driven by the addition of Match Factory and strong growth in Toon Blast, which was partially offset by declines in hyper-casual mobile portfolio and Empires and Puzzles. NBA 2K grew low single digits, while Grand Theft Auto Online was relatively flat.  During the quarter, TTWO launched NBA 2K25 and Game of Thrones: Legends.In terms of distribution channels, Digital online revenues grew 4.9% year over year to $1.3 billion and accounted for 96.1% of GAAP net revenues. Physical retail and other revenues slumped 10.8% year over year to $53.1 million and accounted for 3.9% of GAAP net revenues.Digital online bookings improved 3.3% year over year to $1.41 billion and accounted for 96.1% of bookings. Physical retail and other bookings declined 21.3% from the year-ago quarter to $57.7 million and contributed 3.9% of bookings.In terms of platform, revenues from mobile, console, and PC and other accounted for 54%, 38% and 8% of GAAP net revenues, respectively. Mobile revenues increased 6.3% year over year to $722.5 million. Console revenues inched up 0.9% year over year to $508.9 million. PC and other revenues increased 6.4% year over year to $106.8 million.Bookings from mobile, console, and PC and other accounted for 54.7%, 36.3% and 9% of bookings, respectively. Mobile bookings increased 9.2% year over year to $723 million. PC and other revenues increased 24.5% year over year to $129.6 million. Console revenues fell 8.3% year over year to $622.3 million.Gaming Metric DetailsDuring the quarter, sales of Grand Theft Auto V outperformed expectations and, to date, the title has sold in more than 205 million units worldwide. Grand Theft Auto Online also exceeded plans, driven by sustained engagement with the summer content pack Bottom Dollar Bounties, and an array of updates, including the new, multi-stage Assault on ATT-16 mode, and experience improvements, such as a new anti-cheat system for the PC version of Grand Theft Auto Online.Momentum also continued within GTA+, as Rockstar grew its membership by 35% over last year, and added the classic title, Bully, to the library of available games.Red Dead Redemption 2 posted another fantastic quarter. The title has sold in more than 67 million units to date and, six years after its release, still ranks in the top 10 for unit sales globally, according to GSD.Rockstar Games was pleased to expand its audience further with the successful launch of Red Dead Redemption and Undead Nightmare for PC on Oct. 29.On Sept. 6, 2K and Visual Concepts launched NBA 2K25, which scored among the highest ratings on New Gen consoles in recent franchise history. TTWO added 9,000 new ProPLAY animations that provide increased authenticity and an all-new dribble engine, representing the biggest technological update in the series’ 26-year history.  To date, the title has sold in nearly 4.5 million units and achieved phenomenal Recurrent Consumer Spending performance.  Compared to NBA 2K24 for the same period last year, NBA 2K25 delivered meaningful double-digit growth in average revenue per user and 40% growth in average games per user.Zynga delivered another quarter of solid results. Match Factory is scaling rapidly and is on track to become Zynga’s second-largest title by the end of this year in terms of projected annual Net Bookings. The title grew approximately 16% over the last quarter, driven by its engaging gameplay, including the recent Star Race bold beat and strategic investments in user acquisition.Toon Blast is maintaining its fantastic path of growth, with net bookings increasing more than 50% over the last year, as TTWO deployed highly engaging new features, including new single-player and team-based events and social challenges.  Screw Jam remains a top fifty game in the U.S. Apple App Store. Nordeus released the highly anticipated 2025 edition of TTWO’s popular soccer manager game, Top Eleven. During the quarter, Zynga launched Game of Thrones: Legends.Operating DetailsTake-Two’s GAAP gross profit surged 75.2% year over year to $727.9 million. Gross margin expanded to 53.8% on a year-over-year basis from 32% in the year-ago quarter.Operating expenses gained 6.9% year over year to $1.02 billion. On a management basis, operating expenses rose 24% year over year.Selling expenses rose 37.9% year over year to $461.3 million. General and administrative expenses gained 41.9% year over year to $253 million. Research & development expenses declined 6.3% year over year to $246.7 million.Operating loss was $297.2 million compared with the year-ago quarter’s operating loss of $543.7 million.Balance SheetAs of Sept. 30, 2024, Take-Two had $879.6 million in cash, cash equivalents and short-term investments compared with $1.09 billion as of June 30, 2024.The company had a debt of $3.65 billion as of Sept. 30, 2024.GuidanceFor the third quarter of fiscal 2025, Take-Two expects GAAP net revenues between $1.36 billion and $1.41 billion. Operating expenses are expected between $913 million and $932 million. On a management basis, operating expenses are expected to grow by approximately 11% year over year, which is primarily driven by additional marketing for Match Factory and the addition of Gearbox, partially offset by savings from the cost reduction program.  It expects a loss per share between $1 and $1.15. Per management, the reporting tax rate is anticipated to be 18%.Net Bookings is expected to be in the range of $1.35-$1.4 billion compared with $1.34 billion in the year-ago quarter. The company’s release slate for the guided quarter includes Red Dead Redemption and Undead Nightmare for PC.The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory, hyper-casual mobile portfolio, Empires & Puzzles, Words with Friends, the Red Dead Redemption series and Merge Dragons.The company projects recurrent consumer spending to increase by approximately 9%, which assumes a low double-digit increase for mobile, driven by the addition of Match Factory and growth in Toon Blast, partially offset by declines in TTWO’s hyper-casual mobile portfolio and Empires and Puzzles. The company expects an increase for NBA 2K and a decline for Grand Theft Auto Online in the guided quarter.For fiscal 2025, the company expects GAAP net revenues between $5.57 billion and $5.67 billion. The company expects net bookings in the range of $5.55-$5.65 billion, suggesting 5% growth compared with fiscal 2024.Total operating expenses are now expected in the range of $3.77-$3.79 billion compared wirh $5.83 billion last year. It expects a loss per share between $4.43 and $4.8.For fiscal 2025, net cash provided by operating activities is expected to be roughly $(200) million. Capital expenditures are expected to be approximately $140 million.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates review.The consensus estimate has shifted -63.6% due to these changes.VGM ScoresCurrently, Take-Two has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Take-Two has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerTake-Two belongs to the Zacks Toys - Games - Hobbies industry. Another stock from the same industry, Mattel (MAT), has gained 2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Mattel reported revenues of $1.84 billion in the last reported quarter, representing a year-over-year change of -3.9%. EPS of $1.14 for the same period compares with $1.08 a year ago.Mattel is expected to post earnings of $0.22 per share for the current quarter, representing a year-over-year change of -24.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.Mattel has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Take-Two Interactive Software, Inc. (TTWO): Free Stock Analysis Report Mattel, Inc. 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