Take-Two Interactive Software (O:TTWO), maker of the extremely popular Grand Theft Auto (GTA) series and 2K games, is set to report 2Q2016 earnings today after the closing bell. The Estimize consensus is expecting EPS of $0.15 and revenue of $322.26 million while Wall Street analysts are calling for EPS of $0.14 and revenue of $319.79. With the outstanding results of other video game competitors like EA, investors are expecting a similar positive earnings surprise for Take-Two Interactive.
A Dependency On Hits
The video-game industry is usually pretty black and white in terms of earnings and revenues. Hits drive growth, profits, and ultimately investor confidence. Take-Two has had its fair share with GTA and 2K and has seen tremendous growth. However, in 2Q2016, there are no hits to work off, merely just further information on NBA and WWE 2K16 sales. Investors want to see the same success that EA posted, but Take-Two does not have any highly anticipated titles set to hit shelves soon.
The NBA 2K series has established itself as one of the most dominant and powerful video game franchises out on the market. The company promises every year to deliver the best and most advanced basketball video game and according to its loyal fan base, Take-Two delivers. To illustrate this, within a week of release, NBA 2K broke its record and sold 4 million copies worldwide.
Activision And King Digital. A Puzzling Move
Take-Two interactive is the 3rd largest video game and entertainment company in the industry and it is commonly known amongst video game aficionados and investors that the firm is significantly behind Electronic Arts Inc (O:EA) and Activision Blizzard (O:ATVI). The New York City based video game publisher suffers from long development times and unclear release schedules. For example, the release time between GTA IV and GTA V was 5 years. Though both extremely popular, 5 long years was a time where EA and Activision were able to capitalize with fresh new concepts. The next GTA installment is set to reach shelves in 2017, still a 3-year gap.
Recently, Activision acquired Candy Crush maker, King Digital Entertainment (N:KING), for a whopping $5.9 billion. Activision is currently attempting to breach the mobile gaming sector and through King Digital, has the means to do so. However, the $5.9 billion could have been better served by working a deal to acquire Take-Two. In 2014, both of the companies had a mutual interest in a merger, but nothing materialized. In 2008, EA attempted to purchase Take-Two for roughly $2 billion. The offer was rejected. However, a mega-merger between Activision and Take-Two could have been monumental and game changing to the industry. Both companies have titles with cult followings, leading to possible opportunities to create films based off the popular stories. Given each company has something the other does not, the possibilities would have been endless. Do not rule out the idea behind a future merger, as both companies would benefit.