Free Annual Reports
Take-Two's Outlook Causes Double Take
Shares of Take-Two Interactive Software (Nasdaq:TTWO) declined sharply in December. Given the company's first quarter outlook, the stock could face additional pressure. However, the stock's further decline could present an opportunity for patient investors.
IN PICTURES: 10 Insurance Tips For Homeowners
Near-Term Pain
Take-Two currently is expecting a loss of 45-55 cents per share in its first quarter, which is a much steeper drop than the 40-50 cents per share loss it had been expecting. Wall Street analysts predict an average loss of 47 cents, which probably won't be received with open arms by most investors. Adding to the pain is the company's decision to sell its distribution arm, Jack of All Games, for $43.3 million, a price many believe is too low.
Long-Term Possibilities
All is not lost, though. Take-Two does something extremely important for the younger generation - it provides entertainment. The video game-maker is known for well-recognized titles such as Grand Theft Auto and NBA 2K10. Sales of video games have increased steadily over the past decade, as gaming variety has expanded, appealing to a broader demographic than in previous years. With more youth attracted to video games, Take-Two offers products with undying demand.
Another attractive feature of the company is the fact that Carl Icahn holds a double-digit stake. A well-respected investor, Icahn has a knack for getting involved in troubled companies and pressuring boards for positive change. One example that comes to mind is Yahoo (Nasdaq:YHOO). Icahn became involved in Yahoo stock around the time some speculated that it could be taken over by Microsoft (Nasdaq:MSFT). Icahn swooped in and obtained board representation. Today, Yahoo remains independent. (To learn more about Carl Icahn, check out Can You Invest like Carl Icahn?)
Whether Icahn will attempt to enact big changes at Take-Two remains to be seen. But his mere presence should be taken as a sign of his supporting belief in the fundamentals and future profitability of the company. However, his involvement could spur rumors that his intent is to push the company toward an ultimate sale. For the record, some have speculated that Take-Two could be attractive to Electronic Arts (Nasdaq:ERTS), another popular video game-maker. Some investors may try to ride Icahn's coattails at some point, which could result in renewed interest in the stock. If Take-Two becomes subject to more serious takeover rumors, shareholders should see a hefty price appreciation.
Bottom Line
While shares of Take-Two could be under pressure in the near-term, 2010 could end up being a good year for the company because of its solid business model and high consumer demand for games such as Grand Theft Auto. In addition, Carl Icahn's involvement in the stock could result in an Icahn Lift, which would be a boon for shareholders. (To build an investment portfolio of video game stocks, refer to Power Up Your Portfolio With Video Game Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 10 Insurance Tips For Homeowners
Near-Term Pain
Take-Two currently is expecting a loss of 45-55 cents per share in its first quarter, which is a much steeper drop than the 40-50 cents per share loss it had been expecting. Wall Street analysts predict an average loss of 47 cents, which probably won't be received with open arms by most investors. Adding to the pain is the company's decision to sell its distribution arm, Jack of All Games, for $43.3 million, a price many believe is too low.
Long-Term Possibilities
All is not lost, though. Take-Two does something extremely important for the younger generation - it provides entertainment. The video game-maker is known for well-recognized titles such as Grand Theft Auto and NBA 2K10. Sales of video games have increased steadily over the past decade, as gaming variety has expanded, appealing to a broader demographic than in previous years. With more youth attracted to video games, Take-Two offers products with undying demand.
Whether Icahn will attempt to enact big changes at Take-Two remains to be seen. But his mere presence should be taken as a sign of his supporting belief in the fundamentals and future profitability of the company. However, his involvement could spur rumors that his intent is to push the company toward an ultimate sale. For the record, some have speculated that Take-Two could be attractive to Electronic Arts (Nasdaq:ERTS), another popular video game-maker. Some investors may try to ride Icahn's coattails at some point, which could result in renewed interest in the stock. If Take-Two becomes subject to more serious takeover rumors, shareholders should see a hefty price appreciation.
Bottom Line
While shares of Take-Two could be under pressure in the near-term, 2010 could end up being a good year for the company because of its solid business model and high consumer demand for games such as Grand Theft Auto. In addition, Carl Icahn's involvement in the stock could result in an Icahn Lift, which would be a boon for shareholders. (To build an investment portfolio of video game stocks, refer to Power Up Your Portfolio With Video Game Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Glenn Curtis
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.
Free Annual Reports
