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Fair or not, Take-Two Interactive (NASDAQ: TTWO) has a reputation for a shallow pipeline of shareholder-enhancing software. It is known simply as the Grand Theft Auto publisher. There's more to Take-Two, of course. There are sports titles, for example. There's BioShock. How about the big hit for the Nintendo (OTC: NTDOY) Wii, Carnival Games? What about Borderlands?
That's all well and good, but if you look at the company's latest earnings report, you'll have no choice but to conclude that the one-game reputation is firmly intact.
Take-Two's top line plummeted 68% during the fiscal third quarter. Net loss on an adjusted basis came to 66 cents per share. There was a huge profit of 93 cents per share in the year-ago period, driven by the fourth edition of Grand Theft Auto. Not a great comparison. At least the performance was a little better than expectations. According to Earnings.com, Wall Street was calling for a loss of around 68 cents per share.
Does that offer any comfort? It probably doesn't. Take-Two just isn't a strong publisher when it doesn't have a new version of its flagship franchise in the marketplace.
We've had some hardware price cuts, so the question is, will Take-Two benefit from them? Probably. If there are more Sony (NYSE: SNE) PlayStation 3 units and more Microsoft (NASDAQ: MSFT) Xbox 360 consoles in homes, then there are more opportunities for Take-Two to sell software. Plus, one might begin to assume that the Wii will get cheaper within the next year as well.
Unfortunately, this still doesn't make me want to invest in Take-Two. If you look at the company's stock performance, you'll find a pretty attractive story of capital appreciation year-to-date. At the beginning of 2009, Take-Two was priced a little under $8 per share. The stock closed at $10.16 on Tuesday. So, it seems as if investors are happy with the publisher's prospects and believe that things will get better for it.
The stock could continue to go higher, but I personally have no desire to buy it. At least, that's my current opinion; I should note that I've traded Take-Two in the past. Right now, Activision Blizzard (NASDAQ: ATVI) is my link to the video-game space. I'm way more comfortable owning this publisher. Especially going into Christmas. I think it will hold up well against the competitive forces of its big rival, Electronic Arts (NASDAQ: ERTS).
According to the release, Take-Two will have some new content based on the outlaw universe it made famous in stores in the fourth quarter (e.g., Grand Theft Auto: Episodes from Liberty City for Xbox 360), but we're not talking Grand Theft Auto V. Until then, many investors just won't be interested.
Disclosure: I own Activision Blizzard; positions can change without notice.
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