Analyst sees weakness from Take-Two

GTA publisher will report lackluster sales for recent quarter with even wobblier legs ahead, says one industry watcher.

Take-Two Interactive, the beleaguered publisher of Rockstar Games' Grand Theft Auto series, will report earnings for the August-October '05 quarter this week. In anticipation of that report, one analyst is predicting the company will report earnings at the low end of its adjusted guidance.

Take-Two currently estimates that revenue for the quarter ending October 31, 2005, will be between $286 and $291 million. In a brief memo to investors today, Michael Pachter of Wedbush Morgan said he expects the publisher to report revenues of no more than $286 million. That quarter closes out the company's full 2005 fiscal year.

The news can hardly be called surprising. In late October, officials reduced their estimates of full-year earnings for fiscal year 2005, from $1.22–$1.27 billion to $1.18–$1.185 billion.

At the same time, the company adjusted its Q1 '06 earnings forecast as well, lopping $50 million off its estimates. Before the October 31 warning, the company was anticipating revenues of $350-$400 million for the quarter ending January 31, 2006. Based on a number of factors, including continued losses associated with pulling Grand Theft Auto: San Andreas from shelves, it adjusted earnings down to the $300-$350 million range.

Pachter also sees some sluggishness lasting into the current fiscal year (November 1, 2005, through October 31, 2006). "As industry sales continue to be challenging, we expect Take-Two to lower fiscal year '06 and Q1 '06 guidance," he said today.

Pachter offered some consolation to Take-Two, adding that whatever downturn the company is experiencing, it is being similarly felt by other publishers. "Given weak November NPD sales and Electronic Arts' and Activision's recent earnings warnings, we believe that Take-Two [also] experienced weak sales during the holiday period."

Contributing to the weak sales are consumers who, according to Pachter, "continue to shun current generation games while waiting for next generation consoles."

Currently, Take-Two is predicting current fiscal year revenues of $1.35–$1.45 billion. Pachter's estimates for the current year are less optimistic. Today he lowered fiscal year 2006 estimates for revenue from $1.35 billion to $1.30 billion--and for the current quarter that ends January 31, 2006, Pachter is lowering his revenue estimates from $325 million to $285 million.

If Pachter is right, investors can expect to see Take-Two's revenue figures adjusted down when CEO Paul Eibeler chairs his company's conference call with analysts this Thursday.

Pachter maintains a cautious Hold rating on the stock (with a $20 target price), suggesting investors "stay on the sidelines" for at least the next few months--"until Take-Two can demonstrate that it can deliver on its guidance."

Take-Two (TTWO) shares closed at $18.05 today, up $0.35 from the morning open.

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Discussion

23 comments
35mmfilm
35mmfilm

I will be throwing a party when R* gets taken down and everyone is invited

thekey
thekey

Oblivion is the only game there publishing that is worth looking foward to.

thekey
thekey

GTA sucks the only reason it got any revenue in the first place was because of bad press. Controverse sells right. I remeber the first GTA's were trash, the 3rd, 4th, and 5th ones were the same trash just with 3d graphics.(the graphics weren't that great) I don't even care that there coming out with another GTA for next-gen systems for that matter. They(Take Two) need to come up with better franchises or there going to be hanging with Elvis.

SavoyPrime
SavoyPrime

If it wasn't for GTA, would anyone really care about Take-Two?

chrisdojo
chrisdojo

doom of teh Grand Casual Trash makers? fine with me....

Kaa21
Kaa21

The only gripe I have with T2 is their bug/glitch-ridden release of Stronghold 2 (PC). Otherwise, great games :D

Poedon
Poedon

I'm doing my part to help out T2. I bought amped3, Civ4, and reserved Oblivion.

xplics
xplics

Blah I smell the stink of a TONO FANBOYs running loss in this news clip. Serious though I think the past has shown that Rockstar is quailty and if the quality they put out continues then everything will be fine. Also whoever says that San Andreas is not the best in the series other then maybe the new psp game which to me is different is smokeing something really bad...and should stop right away.

DOHONEYJP
DOHONEYJP

the only thing that may hurt R* in the future is hillary clinton's legislation

brerrabbit23
brerrabbit23

1) stop quoting michael pachter 2) stop caring about T2. they're irrelevant without Rockstar, and Rockstar is irrelevant without GTA.

SLAYERPSP
SLAYERPSP

bully is coming need a new gta with the ps3 or a 360 version soon should help

dollarbill438
dollarbill438

LordofMidnight didn't like San Andreas It floored me I was very impressed in what they did and to me it is without question the best GTA game to date. And apparently according their sales I'm not the only one

LordOfMidnight
LordOfMidnight

GTA Vice City was the last quality game they did. They had better realize the GTA bandwagon is running out of gas and come up with another franchise... and fast!

artillery
artillery

Take Two would be irrelevant by now if it weren't for GTA. These jumbo publishers aren't getting anywhere with their lineups packed with shovelware games.

umbrae
umbrae

I have been waiting to see this company die since the Founder sent me abusive emails for a month when I posted on a forum about how much I disliked playing one of their games. Funny how it was never about improving their games but more about how far this could be shoved up my that....

MrSelf_Destruct
MrSelf_Destruct

Billions of dollars in revenue, man it's tough times for Take Two.

doomed51
doomed51

4th yay! yea but R* will probably come out with something great....the next GTA mebbe?

Vash003
Vash003

Yippy Third !!!!!!!!!!