Take-Two Interactive Software, Inc. (NASDAQ:TTWO) earnings are likely to see upside after better than expected sales of its flagship title Grand Theft Auto V, according to a new report. The report, which was authored by MKM Partners Managing Director Eric Handler, puts a price target of $21 on the company’s shares and takes a look at the future of the company after the most financially successful game of all time.
Gaming is a difficult business to predict, and Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is already trading at an extremely high multiple. Handler reckons that the company’s 2015 lineup looks good, and the tail spending on GTA V DLC and GTA Online microstransctions will help to buffer the company’s financials through the next year.
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GTA V sales
GTA V sales were unprecedented. The company sold more than 11 million copies of the game in the first 24 hours it was available. GTA V broke $1 billion in sales three days after its release. The report from Handler estimates that Take-Two Interactive Software, Inc. (NASDAQ:TTWO) will record around $24.5 billion in sales for the full year 2014.
Handler reckons that the software company has sold 20 million copies of the game since it was released. The incredible success of GTA V is unlikely to be mirrored by any other release by Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Microtransactions from GTA Online and coming DLC packages for GTA V will help to boost the company’s revenue in the quarters to come.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) EPS should come in at around $1.70 per share for the three-month period ending September according to Mr. Handler. The company will release its earning report for the quarter, which Take-Two records as its second of 2014 this afternoon after the market closes in New York.
By consensus, analysts are expecting the company to show earnings of $1.60 per share for the period on revenue totaling $894 million. The company managed to earn 11 cents per share on revenue totaling $279 million in the same period of last year.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is currently valued at more than 1,300 times 2012 earnings. At that valuation it is hard to see how an increase in the company’s share price could be justified. Gaming is a risky business as anybody following Zynga Inc (NASDAQ:ZNGA) can attest.