On Thursday, Take-Two (NASDAQ:TTWO) Interactive Software, Inc. (NASDAQ:TTWO) stock received a positive outlook from Redburn-Atlantic, as the firm initiated coverage with a Buy rating and set a price target of $194.00. The investment firm's decision is based on the anticipated significant financial contribution from the upcoming release of Grand Theft Auto VI (GTA VI).
Redburn-Atlantic's valuation hinges on a forecast that includes a full year's earnings from GTA VI, looking ahead to calendar year 2026. The firm has applied a target multiple of 22 times non-GAAP earnings per share (EPS), which is above the industry's forward 12-month earnings multiple of approximately 19 times. This multiple also represents about a 10% premium over that of Electronic Arts (NASDAQ:EA), Take-Two's closest competitor.
The firm's financial projections for Take-Two are optimistic, with fiscal year 2026 estimates surpassing the consensus by 19%. Additionally, their calendar year 2026 EPS estimate is 4% higher than the consensus. This bullish stance underscores Redburn-Atlantic's confidence in the company's growth prospects, fueled by the expected success of GTA VI.
The analyst from Redburn-Atlantic highlighted the "transformational impact" of GTA VI on Take-Two's financials. This impact is anticipated to be significant enough to warrant a higher earnings multiple compared to peers. The firm's analysis suggests that Take-Two's financial performance will outperform market expectations, particularly in the later part of the forecast period.
Take-Two's stock price will be closely watched by investors as the company progresses towards the launch of GTA VI. With Redburn-Atlantic's coverage initiation and optimistic price target, market participants may take a keen interest in the company's stock performance in the coming months.
InvestingPro Insights
As Take-Two Interactive Software (NASDAQ:TTWO) gears up for the release of Grand Theft Auto VI, its financial health and market performance indicators provide a nuanced perspective for investors. According to InvestingPro data, Take-Two has a market capitalization of $27.9 billion, which reflects its significant standing in the industry. Despite a challenging period with a reported revenue decline of 2.33% over the last twelve months as of Q1 2023, the company has managed a gross profit margin of 55.58%, underscoring its ability to maintain profitability in core operations. However, it's noteworthy that Take-Two is trading at a high EBITDA valuation multiple, which suggests that the market has high expectations for its future earnings potential.
InvestingPro Tips highlight that analysts have recently revised their earnings estimates downwards for the upcoming period, indicating potential concerns about the company's short-term financial outlook. Additionally, Take-Two's short-term obligations exceed its liquid assets, which could pose liquidity risks. On the positive side, the company is expected to return to profitability this year, as per analyst predictions, and has delivered a high return over the last decade. These insights suggest that while there are challenges, the market is optimistic about Take-Two's growth prospects, especially with the anticipated boost from GTA VI. Investors interested in a deeper analysis will find additional InvestingPro Tips at https://www.investing.com/pro/TTWO.
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