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Is Now a Good Time to Buy Take-Two Stock?
Key Points
Take-Two stock is down 21% over the past year, heading into the highly anticipated November release of "Grand Theft Auto VI."
Fiscal 2027 guidance calls for bookings to grow about 20% over the prior year.
At a forward price-to-earnings ratio of about 29, investors may want to wait to see how sales land before buying.
Shares of Take-Two Interactive (NASDAQ: TTWO) are down 21% over the past year, as of Oct. 7. That dip could be a timely opportunity to buy ahead of the highly anticipated release of Grand Theft Auto VI in November, but there's also a good reason to wait.
Take-Two posted nearly $1.4 billion in net bookings (an adjusted measure of revenue) for the fiscal first quarter ending in June, down 3% year over year, but above company guidance that called for $1.37 billion at the high end. NBA 2K and the existing Grand Theft Auto catalog, among other titles, were the biggest contributors to bookings in the quarter.
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Management's guidance for the full fiscal 2027 year, which ends in March, calls for another record year, with bookings expected to reach $8 billion to $8.2 billion. That represents 20% year-over-year growth at the midpoint versus fiscal 2026.
During the fiscal Q1 earnings call in August, CEO Strauss Zelnick called preorders for Grand Theft Auto VI "exceptional."
There are risks. Zelnick noted that preorders can always be canceled. Investors can never know for certain how a new release will translate into sales. There's also the risk that the game fails to meet lofty expectations. The current installment has sold more than 230 million units since 2013, setting a high bar for the new version.
Take-Two stock already prices in strong sales expectations, trading at a forward price-to-earnings multiple of 29. At this valuation, a long-term investor might want to wait until after the game releases on Nov. 19 to see how well it's received before buying shares.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Take-Two Interactive Software. The Motley Fool has a disclosure policy.