Here’s What You Need to Know Before Take-Two Earnings
Take-Two (NASDAQ:TTWO) will report its fiscal fourth quarter of 2012 (March) results after the market close today and host a conference call at 4:30pm EST.
A Closer Look: Take-Two Earnings Sneak Peek>>
• We expect Q4 results in-line with our lowered estimates. Lowering our revenue estimate to $150 million from $162 million, versus consensus of $141 million, and guidance of $112 – 162 million. Lowering our EPS estimate to $(0.55) from $(0.47), versus consensus of $(0.54) and guidance of $(0.65) – (0.50). Our revised estimates reflect sluggish industry sales and a weak debut for The Darkness II.
• Last week, Take-Two announced BioShock Infinite had been delayed to Q4:13 from Q3:13. In response to the delay, we are lowering our FY:13 estimates for revenue to $1.90 billion from $1.95 billion, and for EPS to $3.00 from $3.20 due to a smaller window for reorders. In our view, the delay opened the window for Grand Theft Auto V to be released in Q3:13. We believe October is the preferred release month for Rockstar Games as it has scheduled every prior GTA release during that month (with GTA IV later delayed).
• Management will either reaffirm FY:13 guidance (implying that GTA is on track for release) or will lower guidance. We note that management did not update FY:13 guidance when it announced the BioShock Infinite delay. The company has a history of providing conservative guidance, and we are skeptical that it would achieve FY:13 earnings guidance of over $2.00 without a GTA game. Therefore, a downward revision to EPS guidance would indicate that GTA will not launch this year.
• We expect an update on GTA V release timing as early as next week, or by E3, scheduled for June 5-7 in Los Angeles. If there is no update on either date, we believe it is unlikely that GTA V will launch this calendar year.
• Maintaining our OUTPERFORM rating and our 12-month price target of $19, which reflects a forward multiple of 15x estimated sustainable EPS of $1.20 (fully-taxed) plus an estimated $1/share in net cash. Our multiple is in-line with the historical range, and reflects improving execution.
Michael Pachter is an analyst at Wedbush Morgan.
Featured Reading: Home Builders Continue to Think Happy Thoughts