Michael Pachter: Upgrading Take-Two Interactive on Profitability

According to analyst Michael Pachter at Wedbush Morgan, Take-Two Interactive (NASDAQ:TTWO) is on the path to consistent profitability and focusing on the next installment of blockbuster video game franchise Grand Theft Auto (GTA).

Here’s Pachter’s bullet points for his upgrade of Take-Two Interactive:

  • We are raising our rating to OUTPERFORM from NEUTRAL on TTWO shares, and are maintaining our 12-month price target of $15, reflecting a forward multiple of 12x estimated sustained EPS of $1.00 (fully-taxed) plus an estimated $3/share in net cash and NOLs.
  • The completion of L.A. Noire coupled with the delay of Max Payne 3 makes us confident that key Rockstar employees are again engaged in the development of the next installment of Grand Theft Auto.
  • Our upgrade is based upon recent evidence that the company is on a path to consistent profitability.
  • Take-Two will report fiscal Q3 2011 (ended December) results after market close on Tuesday, February 8 with a conference call at 1:30pm PT (877-407-0984 or at http://ir.take2games.com).
  • We expect Q3 results in-line with our estimates for revenue of $320 million and pro forma EPS of $0.36, compared with consensus for revenue of $310 million and EPS of $0.34, and guidance for revenue of $290 — 315 million and EPS of $0.25 — 0.35.

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