Proactive Investors - Take-Two (NASDAQ:TTWO) Interactive Software Inc (NASDAQ:TTWO)'s decision to undertake further cost-cutting measures has been welcomed by analysts at Wedbush.
The company behind popular video games including Grand Theft Auto, Red Dead Redemption, and Borderlands, plans to reduce its headcount by about 5% and axed some development-stage games, it was revealed this week in a regulatory filing.
The company expects about $165 million in annual cost savings from the plan.
The Wedbush analysts pointed out that Take-Two’s decision was due to increasing competition within the video game space, with gamer appetite for sub-AAA content waning significantly over the last decade.
“We think this is the right decision and expect the company to double down on the projects with the highest return-on-investment (ROI) potential,” they wrote in a note to clients.
However, they noted that this decision was likely to negatively impact revenue in the near term, lowering their estimates for the 2024 and 2025 fiscal years.
Their estimates remain unchanged for fiscal 2026 when they continue to expect the sixth installment of the Grand Theft Auto video game series will be launched.
“We expect investor patience to be eventually be rewarded as we approach that year,” they wrote.
“If initial fiscal 2025 guidance does underwhelm roughly a month from now, we expect management to nudge investors towards more positive items, which could include a firm release date for Grand Theft Auto IV within fiscal 2026 (currently described as a 2025 calendar year release), a new trailer, and/or bullish commentary around fiscal 2026.”
The analysts have an ‘Outperform’ rating and a $190 price target on Take-Two, based on a roughly 23x multiple of their fiscal 2026 earnings per share estimate of $8.25.
Shares of the company traded at $145 late morning on Wednesday.