Take-Two Interactive (TTWO, Financial) has had remarkable run in past nine quarters, delivering impressive performance quarter after quarter. The incredible performance for its Grand Theft Auto V, NBA 2K14, and Borderlands 2 are generating strong catalog sales for the company. Also, it is seeing an outstanding growth in its digitally-delivered revenue as consumers are spending more, particularly for its Grand Theft Auto Online. Let us look at the growth potential for each of these titles that should enhance its top as well as bottom line growth in the future.
Key titles driving growth
Take-Two continues to celebrate success for its Grand Theft Auto V. GTV is still attracting many new audience on Play station 3 and Xbox 360. Further, the company plans to launch the title on PlayStation 4 and Xbox One along with the PC version on January 27, 2015. This launch will also be loaded with the new additions and enhancements such as new weapons, vehicles and activities, additional wildlife, denser traffic, a new foliage system, enhanced damage and weather effects.
In addition, the players returning from the PlayStation 3 and Xbox 360 versions can now avail access to host of new, exclusive content like rare versions of classic vehicles from across the Grand Theft Auto series, activities such as wildlife photography, new shooting range challenges, and new weapons. These new additions and upgraded content plus launch on PlayStation 4 and Xbox One should bring more revenue to the company going forward.
The way ahead
Moreover, the strong growth for its GTA V and GTA online are accelerating its digital revenue. Going forward, the players can enjoy these online games on the PlayStation 4, Xbox One and PC with more to come. Take-Two has made the content and progression available for both GTA V and GTA online to PlayStation 4, Xbox One and PC. In addition, the support of Rockstar Games to these online games has been incredible.
Rockstar Games is expected to roll over new offerings along with the regular content drops and limited-time event updates. It has recently launched 2 updates for these online games such as The San Andreas Flight School Update and The Last Team Standing Update. This should drive growth for these online games and drive sales for Take-Two going forward.
Meanwhile, the NBA 2K14 and Borderlands 2 are gaining incredible traction in the game world. It is attracting many new fans and generating far-fetched revenue for the company. The consumers are spending more money for these games. The customers are now engaged with the games for a long period of time. This ongoing success certainly demonstrates durability for its franchises.
Take-Two is additionally seeing tremendous involvements of users for its NBA 2K15, Borderlands: The Pre-Sequel, Sid Meier's Civilization: Beyond Earth, and WWE 2K15 this quarter so far. Also, Take-Two is witnessing greater user involvements for its NBA 2K and Borderlands online games. Downloads for these games across console, PC and mobile platforms are increasing day-by-day and contributing largely to its digital revenue.
Take-Two has diversified its offerings for tablets and smart phones with the recent release of BioShock and Sid Meier's Civilization Revolution 2 for iOS. Further, the company remains on track to offer its product on applicable platforms, regardless of screen size and distribution channels for both physically and digitally delivered. Take-Two has rolled over various updates and add-on content for Borderlands 2 and other titles, NBA 2K online in China of late.
These updates and add-on also cover in-game spending on WWE Supercard. The company has seen great tractions with these enhancements as downloads for these games grew more than 3.5 million times and has quickly become 2K's most financially successful free-to-play mobile offering.
Ending remarks and valuations
Take-Two looks great with these new launches and strong pipeline of great contents that should drive its growth in the future. The analysts expect its earnings to grow at CAGR of 28.53%, greater than average industry CAGR of 20.43% for the next five years. This demonstrates attractive returns for shareholders in the long-run.
However, the stock is little expensive with the trailing P/E of 6.16 and forward P/E of 18.57, but its long term prospects looks pretty attractive and should yield good returns to investors going forward. Moreover, the stock enjoys strong performance and wealth metrics. It has profit and operating profit margins of 20.38% and 21.68% respectively, while its ROE stands at 75.11% for the trailing 12 months. Its balance sheet carries total cash of $803.78 million, which is quite enough to cover its entire debt of $464.87 million. Take-Two has operating cash flow of $433.32 million and levered free cash flow of $283.53 million.
