The popularity of pre-orders for “GTA 6” is expected to reverse the decline! Citi is bullish on Take-Two Interactive Software (TTWO.US) to $270

The Zhitong Finance App learned that US game publisher Take-Two Interactive Software (TTWO.US) announced the results for the second quarter of the 2027 fiscal year after the market on November 9 EST. According to financial reports, the company's net bookings (Net Bookings) for the quarter were US$1,600 million, down 18% year on year, slightly lower than the company's previous guidance range of US$1,620 billion to US$1,670 billion; revenue of US$150 billion, down 15.4% year on year, also lower than the market's agreed expectations of about US$1.66 billion. Under GAAP, the net loss was US$54 million; the loss per share was US$0.29, which was significantly narrower than the loss of $0.73 per share in the same period last year. The management reiterated the annual net reservation amount guideline of US$8 billion to US$8.2 billion, and for the first time gave a net booking guideline of US$3.350 billion to US$3.50 billion for the third fiscal quarter, implying that GAAP net revenue would “more than double” this quarter, but this range falls short of the LSEG statistics's agreed estimate of US$3,510 billion. As of press time, the Take-Two interactive software rose nearly 5% on Monday night.

Citi pointed out in a research report released after Take-Two Interactive Software's results that the company's net bookings for the second quarter were 4% lower than the market's consensus forecast; GAAP's loss per share was 0.29 US dollars, better than Wall Street's expected loss of 0.75 US dollars per share, and also better than the company's previous guidance range of 0.84 to 0.75 US dollars per share.

The company reiterated its forecast for net booking revenue of $8 billion to $8.2 billion for the 2027 fiscal year. As a reference, Take-Two Interactive Software's guideline for net bookings for FY2027 is 6% lower than Wall Street's consistent forecast, and the company's guideline for net revenue for FY2027 is also 5% lower than the consistent market forecast. Simply put, the market's unanimous expectations are more optimistic than the performance guidance given by the company.

The CEO of Take-Two Interactive Software commented positively on the release of the new “GTA” series, pointing out that pre-orders “far exceeded” initial expectations and helped offset the weaker-than-expected impact of net pre-orders for “NBA 2K”. The weakness of the “NBA 2K” business led to a 9% year-on-year decline in recurring consumer spending (RCS), compared to a 5% decline previously given by management.

Given that “GTA 6” is scheduled to be released on November 19, and the current pre-order situation is far better than management's initial expectations, Citi believes that the weak “NBA 2K” business may provide investors with an attractive buying opportunity before “GTA 6” goes on sale.

Citi maintains a “buy” rating for Take-Two interactive software, with a target price of $270, which is about 26 times the expected non-GAAP earnings per share for the 2028 fiscal year. This target valuation multiplier is lower than the company's historical forward price-earnings ratio (NTM PE) for the past five years.

Citi added that factors that may cause the stock price to decline and subject its target price to a downside risk include: 1) If certain game titles take longer than expected and are not released according to the schedule expected by the market, the market's agreed revenue and profit forecasts may face downward pressure, causing the stock price to face a downside risk, and the target price may also be pressured as a result. 2) If consumer spending or the macroeconomic environment deteriorates, the company's actual announced revenue may fall short of current market expectations, thereby exposing the stock price to a downside risk and putting pressure on the bank's target price. 3) If the mobile gaming ecosystem continues to weaken, or if the mobile privacy policy changes further, it may adversely affect Take-Two Interactive Software's mobile gaming business.