Outlook: Is Take-Two Interactive’s Future Still Uncertain?
Take-Two Interactive’s (NASDAQ:TTWO) Q2 beat driven by record-breaking Grand Theft Auto V sales. Revenue was $1,269 million versus our estimate of $875 million, consensus of $954 million, and guidance of $750-$800 million. On Tuesday, the company announced Grand Theft Auto V sell-in of nearly 29 million units to date. EPS was $2.49 versus our estimate of $1.50, consensus of $1.71, and guidance of $1.20-$1.35. GAAP EPS was only $(1.40), as revenue deferral rules required the company to exclude net revenue and COGS related to sell-in of Grand Theft Auto V due to the release of Grand Theft Auto Online in Q3, not Q2.
Guidance was solid, and we believe realistic. The company increased FY:14 guidance for revenue to $2.20-$2.30 billion from $1.775-$1.875 billion and for EPS to $3.50-$3.75 from $2.25-$2.50. We are increasing our FY:14 estimates for revenue to $2.36 billion from $1.97 billion and for EPS to $3.90 from $2.77 to reflect the Q2 beat and revised guidance.
It appears that Q3 revenue guidance includes approximately 5 million units of NBA 2K14, 3 million units of WWE 2K14 and 5 million units of GTA reorders, plus $50 million of digital sales. Given that we expect some catalog sales and some upside to digital, we think Q3 guidance may be conservative. Q4 implied guidance reflects a likely $150 million in GTA DLC sales, 1 million units of unannounced MLB 2K14, and modest catalog sales.