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"GTA VI" release should fuel "substantial" jump in Take-Two bookings - JPMorgan

Published 06/06/2024, 08:07 AM
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Investing.com -- The hotly-anticipated release of the latest installment of Take-Two (NASDAQ:TTWO) Interactive's mega-popular "Grand Theft Auto" franchise should fuel a "substantial" uptick in bookings and profitability at the videogame maker, according to analysts at JPMorgan.

In May, Take-Two set the release date for the title -- "GTA VI" -- in the fall of next year. The game is widely tipped to be an instant hit with gamers, with analysts predicting that it could fuel billions of dollars in annual sales.

However, the timing of the game's release led Take-Two to scale back its financial expectations for its 2025 fiscal year. The company now anticipates that bookings during the period will be between $5.55 billion to $5.65 billion, down from its prior outlook of a little over $7 billion.

Meanwhile, Take-Two has laid off 5% of its workforce in a bid to rein in costs in response to broader industry-wide concerns over a slowdown in spending by inflation-squeezed customers.

In a note to clients on Thursday, the analysts at JPMorgan added that the gaming sector is becoming increasingly focused on maximizing the success of titles that are already proven winners. "Consumer engagement and publisher resources" have consolidated around the largest gaming franchises, they said.

"We believe these trends favor scaled players in the industry, with the biggest hits likely to get bigger and the mid-tier titles likely to get squeezed as the cost to compete increases," the analysts argued.

For that reason, investor expectations for "GTA VI" are high, the JPMorgan analysts said. Given the success of prior releases like "GTA V" and "Red Dead Redemption 2", they anticipate the game will drive a sharp "step-function increase in bookings and profitability" at Take-Two and possibly act as a "catalyst to valuation."

The analysts reiterated their "Overweight" rating of Take-Two and lifted their December 2024 price target to $200 from $180.

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