Take-Two Interactive (TTWO, Financial) has delivered better-than-expected results for nine consecutive quarters. Games such as Grand Theft Auto V, NBA 2K14, and Borderlands 2 are its key drivers, and can help the company get better in the long run. Let's take a look at the reasons why Take-Two can be a good long-term investment.
The key growth drivers
The key driver of Take Two Interactive’s success story is Grand Theft Auto V. The company is now aligned to drive new innovations and changes in the game to make this torch bearer more attractive. The game is expected to attract considerable audience on PlayStation 3 and Xbox 360. Seeing this healthy and favourable momentum, Take Two Interactive is now planning to launch this game on the PlayStation 4 and Xbox One platform as well.
The growing popularity is expected to further add wings to Take Two Interactive’s smooth growth momentum. In addition, NBA 2K14 and Borderlands 2 are also getting accepted in the market well and are contributing well to company’s growth momentum by attracting more customers.
Take Two Interactive is positioning itself to capture the high margin opportunity that it is seeing with its game titles. It is now focusing closely on innovations, making its games more attractive. It is also excited about the upcoming launch of its games on PlayStation 4 and Xbox One platform in future which will stretch Take Two Interactive’s footprint in the gaming industry.
Moreover, Take Two Interactive has also under taken a strategy to release its games on all relevant platforms despite the screen size. Under this, the company is expanding its offerings for tablets and smartphones as well. It has also released BioShock and Sid Meier’s Civilization Revolution 2 for iOS.
A strong pipeline
The upcoming pipeline of new games seems strong for Take Two Interactive. It is coming up with variety of games in future. It is releasing BioShock infinite with improved graphics, immersive storytelling and heart pounding action. This game can be a great growth driver for the company as in the past also the company saw good gamer engagement with this game. Further, with the additional features such as new weapons, vehicles, additional wildlife, denser traffic etc, Take Two Interactive is launching Grand Theft Auto V on the PlayStation 4 and Xbox One platform.
This will also lead the company to see increasing gamer traffic with this game offering in future, driving good revenue to the camp. It is also engaged in the development of BattleBorn which is a shooter game. This game is expected to give the gamers an all new hero shooter experience which can be an attractive point for the company. The company is planning to launch it in 2016 which also strengthens its long term prospects.
Conclusion
Moving to the fundamentals, the stock is dirt cheap with a trailing P/E of just 6.62. But the forward P/E of 19.83 shows good earnings growth in the near term as well. Even in the long term, Take Two Interactive can be a good long term holding as its earnings for the next five years are growing at a CAGR of 28.53 which is more than the industry average of 20.38. Thus, considering all the aspects it is clear that Take Two Interactive is definitely worth your dollars and the investors should definitely include it in their portfolio.
