J.P. Morgan analyst Cory A Carpenter reiterated an Overweight rating on the shares of Take-Two Interactive Software Inc
The following are the analyst's opinions from the company's CEO and CFO meetings.
The analyst noted TTWO sounded rather positive on mobile gaming trends, both for the industry and Zynga specifically.
Management noted mobile feels 'good and robust,' with stable / slight industry growth in 2024 as consumers are showing a willingness to spend on new titles after a dearth of hits, said the analyst.
The management considers GTA VI increases focus on the franchise and thus GTA V units could continue to see healthy demand into launch.
While TTWO has yet to comment on its Online strategy, even in a scenario where GTA VI Online is separate from GTA V Online, there are examples that suggest both can thrive such as NBA ~2K10 Online still going strong after launching in 2017, said the analyst.
The analyst came away more skeptical of a potential FIFA 2K simulation game release being in the works as the management said a FIFA license would not come with any sports league rights and hence it would be tough to go head-to-head with EA on a simulation title.
The analyst noted that ~80% of the opex increase in FY25 is for marketing, and the majority of that is for Match Factory user acquisition.
TTWO estimates the Gen-9 console base to be ~112 million by the time GTA VI launches, compared to the analyst's estimated ~160 million Gen-7 install base when GTA V launched, which had a ~20% attach rate.
The analyst expects TTWO's GTA VI release in Fall 2025 to drive a sustainable step-function increase in revenue and profitability, and potentially act as a catalyst to valuation.
The analyst also sees upside optionality from new IP, improved mobile performance (~50% of bookings), and ongoing cost efficiencies.
Price Action: TTWO shares are trading lower by 0.52% at $159.70 at the last check Tuesday.
