Take-Two falls as tough macro prompts guidance cut, analysts still see positives

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Take-Two falls as tough macro prompts guidance cut, analysts still see positives
Credit: © Reuters.

By Senad Karaahmetovic

Shares of Take-Two (NASDAQ: TTWO ) are moving lower in pre-open Tuesday after video gamer reported weaker-than-expected earnings for its fiscal third quarter.

TTWO posted a loss of $0.91 a share on revenue of $1.41 billion, missing the consensus for a loss of $0.89 a share and $1.46B, respectively. Net bookings grew 60% to $1.38B, missing the lower-bound guidance by 2% and below the $1.45B consensus.

"Our net bookings of $1.38B were slightly below our prior guidance, as we believe that consumers shifted their holiday spending toward established blockbuster franchises and titles that were offered with pricing promotions in light of macroeconomic conditions," the company said.

For this quarter, TTWO said it sees net bookings in the range of $1.31B-$1.36B, missing the $1.49B consensus. The adjusted EPS is seen at $0.65 (plus or minus 5 cents), a big miss compared to the analyst expectations for earnings per share of $1.03.

Given the soft FQ4 forecast, the full-year forecast for net bookings is now slashed to the range of $5.2B-$5.25B from $5.4B-$5.5B earlier. The adjusted EPS is now seen at $3.55 (plus or minus 5 cents), down from the earlier range of $3.85-$4.10.

"We are operating in an environment that is in many ways more challenging than we anticipated," the company said.

The company hopes to identify over $50 million in annual savings as it implements a cost-reduction program.

Bernstein analysts said TTWO struggled with smaller new releases while bigger franchises performed better.

“On the positive side, Zynga performed in line with management expectations, although mobile revenue remained flat sequentially. We think this matters more for the equity story from here than the worse-than-expected initial sales for the critically acclaimed Marvel's Midnight Suns,” the analysts added.

“Macro wins again,” said KeyBanc analysts. Still, they reiterated an Overweight rating.

“FY24 is an unknown, but the path from here is a multiyear setup of sequential growth into an eventual blockbuster of its own,” the analysts wrote.

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