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A Closer Look at Take-Two Interactive as Icahn Inches Closer to 10% Ownership
Posted by: Dianne Tordillo (IP Logged)
Date: November 7, 2012 02:04PM

In a 13D filing to the SEC dated Nov. 5, outspoken activist investor Carl Icahn has reported to boosting his stake of Take-Two Interactive Software Inc. (TTWO) to a total ownership of 9.57 percent, up from 8.7 percent ownership reported in the second quarter of this year.

This brings his total holding to 8,686,074 shares of Take-Two Interactive to date.

Headquartered in New York City, Take-Two Interactive is the video game developer and publisher of an expansive list of video games including Grand Theft Auto, NBA 2K12, Max Payne and Duke Nukem, to name a few.

In its most recent quarterly report, Take-Two reported strong results for its second quarter fiscal 2013 that ended Sept. 30, with a non-GAAP net revenue that grew 169 percent, and a non-GAAP net income that increased to $0.11 per diluted share compared to the same period last year. The release of the game Borderlands 2, catalog sales, digitally delivered content and sales from multiple franchises contributed to the revenue growth.

In the quarter prior however, Take-Two reported somewhat opposite results, with more than $108 million worth of losses in net revenue compared to the same period last year, as well as great losses in non-GAAP net income, due to “negative impact” from a one-time $15 million contractual obligation.

View Take-Two’s 10-Year Financials here.

This up-and-down trend has been apparent in Take-Two’s fiscal data for years. Due its lack of predictability, GuruFocus places its Business Predictability rank at a low 1 out of 5 stars.

TTWO data by

Its Financial Strength rank has also suffered. With a score of 4 out of 10 in this area on GuruFocus, its Cash-to-Debt ratio shows a bare minimum of ability to pay off its debt using cash in hand. Not only that, its Z-Score is in the distressed zone and showing a negative trend line.

View Take-Two’s Z-Score description here.

With Take-Two’s 5 out of 10 Profitability & Growth rank on GuruFocus, shareholders may experience a slower rate of return on equity due to the company’s lack of inefficiency in profits. Additionally, declining numbers graze its net margin, operating margin and revenue growth percentages.

View Take-Two’s Return on Equity Description here.

GuruFocus gives Take-Two an inevitable three Severe Warning signs, implying a bankruptcy possibility in the next two years, poor business operation and a continuing revenue decline.

Take-Two stock is currently down almost 5 percent, trading this morning at $10.84. It has a market cap of $965.6 million, a P/B ratio of 2.1 and a P/S ratio of 1.2.

Icahn has had a holding history with Take-Two since the third quarter of 2007, where he started off with only 462,037 shares. Legendary for his controversial takeover attempts of nonperforming companies, Icahn has also sparked frenzy being tied to the following corporations: Netflix Inc. (NFLX) where he is 9.98 percent owner, Motricity Inc. (MOTR) where he is 30.73 percent owner, Forest Laboratories Inc. (FRX) where he is 11.18 percent owner and Navistar International Corp. (NAV) where he is 14.95 percent owner.

To read more articles about activist Guru Carl Icahn and his other leveraged buyouts, view GuruFocus’ Archives of articles. Also view a comparison of Take-Two Interactive’s competitors here.

Guru Discussed: Carl Icahn: Current Portfolio, Stock Picks
Stocks Discussed: TTWO, NFLX, MOTR, NAV, FRX,
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