Take-Two Interactive Software Inc (NASDAQ: TTWO) is one of the top video gaming companies in the world. Its top seller Grand Theft Auto, the No. 3 selling video game of all time, has left the gaming space and entered the common lexicon. Its top brand name game franchises are also wildly popular — WWE, NBA, Red Dead — but TTWO usually is overshadowed by its larger competitors, Activision Blizzard, Inc. (NASDAQ: ATVI) and Electronic Arts Inc. (NASDAQ: EA).
But keeping a low profile can have its advantages. TTWO has significantly outperformed its competitors in the past 12 months, posting a 92% gain. ATVI is sitting around 58% and EA is up 46%.
There’s little doubt that online gaming is a growth market, regardless of whether the Federal Reserve lowers or raises rates, or whether bitcoin is trading at $1,000 or $10,000.
And mobile is even more dynamic.
The point is, having a secure foothold in this sector is tough to gain, but once you have it, the top players have a well-protected moat around their businesses.
TTWO and its Place in the Sector
When gamers find a game they like, they collectively buy it. And then they buy the next version. And if they like the way the game is designed, they will buy other titles to check them out.
This is how TTWO has built its business. It builds games people want to play. For example, it recently launched a new version of its NBA 2k. The brand is 20 years old. Its newest launch was its best seller to date.
And Take-Two is continually evaluating new games from developers, ready to buy any that it thinks has what it takes to build another multi-decade franchise.
The most compelling reason to buy TTWO at this point is, after all the success it has been having, two things have hit the stock and dropped its price to bargain levels, relatively speaking.
First, the market correction hit. Since most tech stock got spanked in the drop, it’s no surprise that TTWO got painted with the same broad brush.
Second, TTWO reported earnings February 7. Earnings were OK. It took a hit to earnings and revenue because of the tax writeoff but it was all within analysts expectations. And it guided slightly higher for the year, again in line with analysts expectations.
What took it down hardest — it’s off nearly 8% in the past month — was its announcement on Feb. 1 that its popular Red Dead Redemption 2 release was getting pushed back from Q2 to Q4.
But these delays are common in the video game sector and rarely do they hurt sales.
Also remember that both its earnings date and its announcement date fell on two big down days for the broader markets. TTWO stock is now a great buy at a discounted price — and has plenty of gas left in the tank.
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Source: Investor Place