Take-Two Slips on Concern Virus-Fueled Gaming Boom Will Fade

(Bloomberg) -- Take-Two Interactive Software Inc. slipped in late trading after warning that the current boom in video-game play may fade after lockdowns end.

“We do not have expectations for the increased engagement that we’ve seen of late through the back half of the year,” Chief Executive Officer Strauss Zelnick said in a phone interview Wednesday.

So-called recurrent customer spending -- the amount of money players spend after an initial game purchase -- grew 47% in the fourth quarter ended March 31, driving blockbuster results. The company was expecting growth of about 10%.

But shares of Take-Two fell as much as 5.9% in extended trading. The stock advanced 3.2% to $146.84 at the close in New York and has gained 20% so far this year.

So far, the coronavirus outbreak hasn’t had a big affect on Take-Two’s operations, as its 5,000 employees have been working from home. But certain types of game work -- such as motion capture -- can’t be done remotely, Zelnick said. And investors are hoping for a new release of the blockbuster Grand Theft Auto in fiscal 2022, said Matthew Kanterman, a Bloomberg Intelligence analyst.

Critical Year

This is a critical year for gamemakers, which are preparing titles for a new generation of gaming consoles due out around Christmas. As of right now, the new consoles are on schedule, Zelnick said.

So far, lockdowns have been good for Take-Two, as well as most other game publishers. With not much to do, many people have turned to games.

In the fourth quarter, Take-Two’s adjusted revenue grew to $729.4 million, soaring past analysts’ estimates of $582 million. Earnings excluding some items totaled $1.50 a share, nearly double what analysts expected.

For the current first quarter, Take-Two forecasts adjusted revenue of as much as $850 million and up to $1.55 a share in adjusted earnings, both far above Wall Street expectations.

Nearly all of the company’s titles, including NBA 2K20, the Grand Theft Auto franchise, Red Dead Redemption 2 and Borderlands 3, beat expectations during the fourth fiscal quarter, the company said. Grand Theft Auto V has now sold more than 130 million units.

As the Take-Two anticipates lockdowns getting lifted, growth in the second half of the year should slow from current pace. The company predicts up to $2.65 billion in adjusted sales for the full year, in line with Wall Street expectations. But the top end of its adjusted earnings forecast of $3.25 a share trails expectations of $4.33.

“While fiscal 2021 will be a light new release year, we expect to deliver strong results, reflecting the diversity and strength of our catalog and live service offerings,” Take-Two said.

(Updates share, adds CEO comment in second paragraph.)

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