Shares in Take-Two Interactive Software Inc (NASDAQ:TTWO) soared Friday after the video game company posted earnings that trounced Wall Street estimates.
Investors sent Take-Two stock flying 11.4% to US$126.12.
For its first quarter of fiscal 2019, the New York-based company posted earnings of US$71.69mln, or US$0.12 per share. It beat consensus earnings estimate of US$0.7 per share.
The company’s revenue declined 7.2% compared to the year-ago quarter from US$418.22mln to US$387.89mln.
The company said that recurrent consumer spending in the shape of virtual currency, add-on content and in-game purchases accounted for 62% of revenue, compared to 41% in last year’s fiscal first quarter.
The biggest contributors to revenue were its bestselling Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K18.
The company said that as of June 30, 2018 it had cash and short-term investments of US$1.10bn.
For its second quarter of the fiscal year, Take Two forecast earnings of US$0.85 per share, below the US$0.89 per share analysts forecast.
Oppenheimer investment take
Analysts at Oppenheimer said the video game-maker stood to benefit from both “company-specific factors” as well as “industry tailwinds” driving both top-line growth and profitability gains.
“We believe Take-Two is set for refreshes of multiple key franchises over the next five years and that a build in internal development capacity will help generate revenue consistency,” wrote Oppenheimer analysts Andrew Uerkwitz and Martin Yang in a note released Friday.
The analysts expect Western-themed action adventure video game Red Dead Redemption 2 to push sales during the holiday season.
“Although Grand Theft Auto V keeps beating expectations and NBA 2K recurrent spending regains momentum, Red Dead Redemption 2 will likely continue dominating the investor discussion on Take-Two,” wrote the analysts.
Take-Two said its financial year 2019 net bookings ranged between US$2.7 to US$2.8bn with the mid-point implying a 38% growth year-on-year and operating cash flow of US$785mln.
“Updated FY19 net bookings guidance is US$30mln higher than before,” wrote the analysts.
The Oppenheimer analysts reiterated their Outperform rating and US$135 price target.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive