Take-Two Interactive Software, Inc.: Triple-Digit Upside for TTWO Stock?

TTWO StockThe Bull Argument for TTWO Stock

The dramatic interest that emerged for the virtual “Pokémon Go” game led to an insidious doubling in the share price of Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY), but the stock has since come back to earth. The gaming sector is attractive, with several major game producers including up-and-comer Take-Two Interactive Software, Inc. (NASDAQ:TTWO). The TTWO stock had been struggling for years, but has found a steadily growing foothold in the gaming sector.

The top gaming companies are Electronic Arts Inc. (NYSE:EA) and Activision Blizzard, Inc. (NASDAQ:ATVI), but Take-Two Interactive Software is not a stock to ignore.

The multi-billion-dollar gaming sector is all about building great entertainment platforms and innovative games. Think about the amazing debut of “Angry Birds,” made by Finland-based Rovio Entertainment, which has been made into a film.

Common among the success of gaming stocks is that these companies tend to have a major game franchise that is the anchor.

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ATVI markets the global sensation Call of Duty franchise and rapidly popular World of Warcraft.

EA is best at its great sports franchises, including its just-released Madden NFL 17 and FIFA 17.

In the case of Take-Two, the company initially was able to survive in the highly competitive gaming sector despite being essentially a one-game developer due to the immense popularity of its Grand Theft Auto franchise. Take-Two has sold hundreds of millions of the game since its initial launch in 1997.

My Bull Case for TTWO

But what has really made Take-Two Interactive Software into a viable stock has been its success in moving from being a one-trick pony to selling multiple high-volume games.

Take-Two is now the leading developer in basketball gaming via its massively popular NBA 2K franchise, which has quickly become a top seller.

More importantly, the success of NBA 2K is helping to diversify revenues for Take-Two, especially in the times between new installments of Grand Theft Auto.

Take-Two Interactive Software has not announced when the sixth installment of Grant Theft Auto will occur but, based on the past lifecycle, it will likely be in late 2017 or 2018.

The revenue estimates for Take-Two Interactive Software reflect this. Revenues for TTWO stock declined in FY16 and only expected to rise 5.10% in FY17 ending in March. The next big growth for TTWO stock is expected to be FY18 when revenues are predicted to surge 23.30% to $2.03 billion, according to Thomson Reuters. (Source: “Take-Two Interactive Software Inc. (TTWO): Analyst Estimates,” Yahoo! Finance, Last Accessed August 25, 2016.)

TTWO stock has returned 46% over the past 52 weeks, easily outperforming the S&P 500.

Take-Two Interactive Software, Inc. NASDAQ Chart

Chart courtesy of StockCharts.com

The chart of TTWO stock is showing a nice rising upward channel, with the stock holding at above the 50-day moving average (MA) and displaying a bullish “Golden Cross” with the 50-day MA above the 200-day MA.

While the short-term for TTWO may prove flat, the stock will likely rally as we move toward the next launch of Grand Theft Auto.