Take Two Interactive May Be Worth A Second Look

Shares of Take Two Interactive Software Inc. (TTWO)  popped during after-hours trading following it’s report of a narrower-than-expected quarterly loss.  The producer of smash hit video games such as “Grand Theft Auto” and “Borderlands” reported a net loss of $33.9 million, or $0.43/share, compared with a net loss of $50.4 million, or $0.66/share, for the same quarter last year.  Consensus estimates were looking for a loss of $0.51/share.

The Street has taken news of the beat kindly, pushing shares up 5%+ during after-hours trading.  Among the highlights of the quarterly report were a 9% year-over-year gain in net revenue and better-than-expected sales of “Carnival Games,” which is now the third best selling game for the Nintendo Wii that is not produced by Nintendo.  Sales of online add-ons for Borderlands outperformed as well.

In then end though, the market is a forward-looking mechanism, and as such, Wall St. really only  cares about guidance.  This is especially so in the case of companies like TTWO that have suffered several consecutive quarterly losses.  Lucky for them, CEO Ben Feder painted a rosy[er] than expected outlook for the coming Q as well as for FY 2010.  In addition to a cost-cutting initiative that is set to yield 9% year-over-year savings in 2010 and 16% thereafter, Feder announced that “BioShock 2” has shipped over 3 million copies since it’s early-February release.  As a result, the revenue outlook for the coming quarter was given a mid-point of $275 million, beating Street expectations of $267 million.

Shares finished after-hours trading at $9.54, good for a 5.65% move in the right direction.  If it can push through resistance at $9.96, there’s a good chance it can rally up towards $11.  There’s no question that TTWO has rolled out a long line of hits, but we also still have to remember that it’s trading under $10 for a reason.  One look at that gap down in early-December is all it should take to remind you to proceed with caution on this one.  But if you’re looking for a high-Beta play on the potential for a consumer recovery, or just a quick 10% – 15% trade, TTWO is definitely worth a look.

Disclosure: No holdings in TTWO.