Take-Two shares lose 30%, analysts react

GTA publisher's stock price down nearly one-third in less than a day, Pacific Crest's Wilson says confidence in management "can not get any lower."

After the close of trading Thursday, Take-Two Interactive delayed Max Payne 3 by a few months and gave investors a grim outlook on its current fiscal year. The effect in after-hours trading was immediate, as shares in the publisher lost 21 percent of their value in a matter of minutes. That was just the beginning, as shares of Take-Two have continued sliding, down $3.34 (31 percent) at press time from yesterday's closing price of $10.92.

"Perhaps next year, things will be different."

One difference between last night's trading and this morning's is that a handful of industry analysts have now weighed in with their reactions to Take-Two's negative announcements. While the response was mixed, some industry watchers didn't bother mincing words.

Saying his confidence in Take-Two management "can not get any lower," Pacific Crest Securities Evan Wilson blasted the publisher's leadership for the 14th and 15th game delays since it took over in mid-2007 and for failing to make the company profitable without relying on Grand Theft Auto.

"We believe there are better ways to invest in video games via names that are not inextricably tied to a single franchise with a management team that has not established an investable track record," Wilson wrote.

Wilson acknowledged that delaying a game to make it better can be a preferable alternative to releasing an unfinished game on time but said if delays happen "to nearly every game released, structural problems likely exist at the company. Take-Two seems to remind investors every quarter that it falls into this category."

Janco Partners' Mike Hickey was similarly disappointed in Take-Two's announcement, retracting his previous "Buy" rating on the stock and placing it under review. He also expressed frustration at the publisher's reluctance to detail development expenses or reveal how many copies games would need to sell to achieve profitability.

"We are astonished at the level of disconnect between street expectations and management's guidance," Hickey said, "suggesting a profound misunderstanding of the company's profitability potential. Management credibility has been meaningfully compromised, in our view; although ultimate performance is product-centric, we remain alarmed provided the lack of clarity."

Not all analysts were so down on the company. Wedbush Morgan Securities' Michael Pachter maintained his "Neutral" rating on the stock but saw a variety of factors the publisher could have working in its favor.

"With no profitability in sight, investors may again conclude that Take-Two is a 'one-hit wonder' with GTA and little else," Pachter said. "We disagree and think that the company has at least eight bona fide franchises, with the potential for 10 or 12. We perceive the problem to be an overly ambitious development schedule, with high expectations and high quality standards leading to inevitable delays."

He also expressed frustration with Take-Two's reluctance to detail its future plans for Grand Theft Auto but said the company could still succeed even with one new installment every three years. If Take-Two generated $3 earnings per share in years when proper Grand Theft Auto installments came out, Pachter said the publisher could easily weather off-years with $0.50 losses per share and still grow the business. (Take-Two's expectations for fiscal 2010 are between $0.40 and $0.60 losses per share.)

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200 comments
peetowser
peetowser

I would buy a next-gen Bully... I would buy a next-gen The Warriors-type game They make a lot of their work to exclude the PS3, next year they will go back and beg them for their money with their PS3 exclusive... Something is indeed weird over there... They need to make fun games like they used to... Because they used to be great at that. Where is that 50 million M$ gave you now?? How many little good games old R* could have done with that??

bguy9
bguy9

They should bring some type of GTAIV "stories" to the PS3 version and market it at 3/4ths game and sell it for $49.00. It would make them tons of money over the next year since GTA V probably won't come out until the end of '10, or knowing Take-Two, most likely be delayed until mid "11. It would also make many pissed off PS3 owners happy.

RitterXplode
RitterXplode

yes but don't release too many GTA or they're going to infest the world and end up selling at 9 bucks.

FinalDuo1886
FinalDuo1886

Basically make another GTA game that isn't a DLC, and all will be well. :D

jadefury27
jadefury27

a new gta will release and all will be right in the world again...

kamizuka
kamizuka

@dogpigfish i think i know the reson of this... in the mid-east GTA was one of the most common games. it "was" because they banned GTA4. so as you can see that made the sales lower, and also the ps3 is the common console in the mid-east(they cant get the DLC) and GTA was sold illegally for 100$ to this very day. i am sure that they are other reasons though

im-a-roustabout
im-a-roustabout

@gnrlstuart Quality Control is about everything you mentioned in your post. That's why they said it.

gnrlstuart
gnrlstuart

rockstar's quality control is not the issue here, its the organisation of it's buisiness model. compare for example, valve corporation, who release a new title without fail yearly, usually the november of every year, with no delays, a firm Q4 release date , and thorough marketing campaign. rockstar cannot afford to miss the crucial foundations of it's buisiness model with constant delays, all over the place release dates, and quetionable marketing campaigns(more to do with the fact gta iv was over advertised, TBOGT was barely advertised, and max payne 3 probably wont have as decent an advertising campaign as it should. all in all, rockstar nes to remember that games cannot be anticipated if they dont even have a firm release date.

twashington9737
twashington9737

northArrow - Regardless of what u are saying, releasing the DLC for the PS3 could have helped ESPECIALLY in light of the fact that the PS3 has been selling out of the wazoo due to the price drop and TakeTwo COULD HAVE picked up even more people who waited for a PS3 price drop, never buying a 360, and wanted GTAIV to go along with their purchases or some where along the way before TakeTwo's fiscal year was up. You don't think the idea of getting the GTAIV DLC may not have made those said people salivate a little bit more, further increasing desire to have GTAIV? It could have helped, immensely, my dude. Don't short mind things then let loose those thoughts...and fanboyism has nothing to do with that...which could be apart of what drove you to post that statement.

Darkon_X
Darkon_X

I don't blame this on the fact that GTA IV is losing ground. I think it's just the economy we're in. Hardly any developers are making good money these days. Also I'm glad EA didn't purchase them because I'm afraid R* games would've suffered the same fate of those developers EA owns and that's being closed down just like Pandemic was closed down a couple of days ago. I'm sure when the next GTA comes out it will do good.

LOXO7
LOXO7

It would be better if they were on EA's side.

dogpigfish
dogpigfish

Profit Margin on downloads are usually 100%. The DLC's are completed typically before the game is released (it takes a few months for testing). In the event that they don't finish the DLC before the release they have an engine and graphics already built from the ground up. The costs are small since all they have to do is move the models around. So northarrow, you are wrong; developers make a lot more money on the DLC's.

northArrow
northArrow

It's funny reading all the PS3 fanboys thinking DLC for their console would have made much of a difference. Profit margins on DLC is lower than full games, since they charge less for them and not everyone with the original will buy it. I'm sure Take-Two looked into it and decided it wasn't worth their time, maybe if Sony threw some money at them this would change. The issue here goes far beyond DLC, it's a combination of a poor economy, poor management, and the inability to get full price games on the shelf

Jak_Napier
Jak_Napier

[This message was deleted at the request of a moderator or administrator]

1MorbidDemon1
1MorbidDemon1

Im not suprised, maybe if they didnt make DLC for just the 360 they wouldnt have such bad earnings.

kvan33
kvan33

[This message was deleted at the request of the original poster]

maverick_76
maverick_76

I think the big problem for this company is the fact the delays hurt quarterly sales where it was thought that the delayed game would come out. Max Payne was slated for a November/December release just sneaking into the end of quarter 4, but since it has been delayed that hurt investors trust that Take Two would be able to do better this quarter than last year's 4th quarter. That is how companies invest-ability is measured, how much can they grow from where they now stand? If they are not going to grow much then why waste my money, it can be better invested elsewhere.

Kan0nF0dder
Kan0nF0dder

Bah, the people who put the money into gaming production are the ones who are disconnected, it's getting as bad as football. Games are art - and not to be discussed like this by fatcats going on and on about profitability.

cmoore4418
cmoore4418

I don't get how delaying games could make Take Two's shares plummet like that. I mean look at the Phenomenon that was GTA IV. That was the biggest entertainment launch in history until COD:MW2 dethroned it this year. So there has got to be some truth in there somewhere about bad managment at Take Two. I mean they were sitting on a goldmine and now look what's happened. And to be honest I don't see that delaying Max Payne 3 is going to help it any. They have completely reimaged that game to where it is unrecognizable to any true fan. They've taken way too many liberties to reinvent Max Payne and delaying it won't change that!

Deantry
Deantry

maybe take two's board of directors should do what Activision Blizzard did and higher a carrier CEO to run their company, maybe that would appease the investors. And as to this argument of pleasing gamers over investors, it is actually a timeless argument in business. Who is the company for? Is how it is most commonly presented. And while I do think a company should always be for its consumers, you have to understand that a 30% drop in shares will most probably effect the quality of their games. If they can't convince investors to stay, they will take their money somewhere else, and that means lower production values, which today in the games industry means lower quality. So if I were you i would seriously reconsider supporting take two's bad management.

Zoomer30
Zoomer30

GTA is getting stale, time to move on. Unless they decide to do an over the top next gen of "Vice City", that would rock. I think one draw to the GTA games was that they could get real sorta A-List stars to play the parts, getting tougher now with all the backlash against GTA.

Zoomer30
Zoomer30

I word sums up what could help them out: AGENT

DitkaKenobi
DitkaKenobi

@StarvingPoet I totally understand where you are coming from as an investor. As a gamer, I couldn't be more pleased with a company that puts gamers first over investors. I'm very much less interested in on-time than I am properly polished. As evidenced by the amount of time I've spent playing Borderlands over the past few weeks rather than MW2 because tight schedules make for glitchy games.

Autolycus
Autolycus

The Bigs series (its a money maker), NBA 2kX (they generate a lot of sales and buzz). Bioshock (even more sales), GTA, Fall Out 3, Borderlands (only going to be bigger), Elder Scrolls (probably their 2nd largest title). Seems to me they have all the best games.

StarvingPoet
StarvingPoet

@DitkaKenobi There is nothing wrong with wanting to release a polished game, but Take-Two delays practically every-game they release. This is a sign of a structural problem within the publisher - if every game is taking longer, then don't plan your release dates so early. From an investor's point of view, when you can't get a majority of you release dates right, then this is a clear sign that your management team is clearly not up to the task of managing. As an investory (not Take-Two, but with Activision Blizzard among other game companies), I would much rather prefer longer release schedules and have them deliver the game before expectations than the reverse.

Darthmatt
Darthmatt

Maybe this will end the days of GTA exclusive content. I am one PS3 owner who would have forked over the cash to extend my time in Liberty city.

shroomboyy2
shroomboyy2

If they would release the gta4 expansion packs to the ps3 they could easily make some easy money to help their bad quarterly sales.

DitkaKenobi
DitkaKenobi

God forbid Take-Two allows developers to delay their games to get them polished before they release them. This article has done nothing but make me appreciate Take-Two's efforts to put out a quality product. Kudos to you, Take-Two.

Valacan
Valacan

One hit wonder? What about Bioshock and Borderlands? I'd say that's at least a three hit wonder.

fps_d0minat0r
fps_d0minat0r

@ inaka_rob i think it has everything.......just its resolution and frame rate ruins the whole experience.....which should be enough to stop any game getting a score over 9. I have to say the AI is poor and it really shows in the car races.

FallenOneX
FallenOneX

rasco2005 You just prove my point, and missed part of it. You said it your self, Wii Fit. 3rd party crap doesn't really count, because it doesn't sell. Secondly, Star fox and Kirby weren't titles I could think of at the time, my OG post said off the top of my head. How many months was Wii Play the "top selling game" because it was packaged with a controller? Notice how MS and Sony keeping changing their models and designs, to either keep up with the times, reduce costs, or fix problems? Did you also notice how it took Nintendo 2 years+ to allow you to actually do something with that SD card slot? Does Nintendo need to step up their game? From a gamers point of view, Hell Yeah. From a financial point of view, why fix what ain't broke.

jim4604
jim4604

Its sad that they lose 30% of stock price because of delaying games. As a gamer (like all of us), I really don't mind delays. If it makes the game better fine do it. The most frustrating thing is getting a unpolished/unfinished game. I have never been so disappointed with a game as Empire Total War. It was released with so many bugs I couldn't play it and I was an avid fan of the series. I understand that people invested in the company don't like delays but it generally makes the games better and correct me if i'm wrong but I thought most games get delayed at least a bit? right? and Blizzard delays games all the time why isnt there stock being butchered? just is dumb. I want Max Payne 3 to be more epic than the first 2. Take as long as you need.

Poodger
Poodger

I have never really bought anything from them except for GTA4, and I sold that a couple days after buying it because it was boring, IMO. I'm sure its a great game, but it's just not my type of game.

buft
buft

lol at take two management!!

issizots
issizots

also i see take twos shares plummeted because OF the delays which when the games WILL EVER comes out and quit being overly delayed then ONLY THEN their value will go back up. gotta have something GOOD AND NEW to bring in revenue and that's something take two really hasn't been doing much of in this quarter. but 2010 will be a high stake for them and maybe alot of other developer companies as this year has seen a super considerable shared percentage of gamers move on to other things and the gamer community shrunk quite some percentage.(not sure on what exact percent so i'm not going to quote unknowledge'd knowledge). But this will probally be the make or break year for some development companies and maybe some shocking merges could apply, either way 2010 is looking up to be like a really challenging year as far as competition goes with the insane global money crisis toward video games(lol). can't pay tha bills wit video games ya know? how about that $40.00 a game bonus for us guys :)

issizots
issizots

lol i don't see teh COD series flurrishing much further than another title until people find something better to play... sorry @irishhitman27 but i would NEVER invest in activision/blizzard by doing that you're aggreeing with bobby kotech(however u spell his name) by saying games should be $80.00 and ALL console should MAGICALLY be UNDER $200.00, would be nice right? but IN REALITY it's not something so easily done, especially at this point in time. I really respect Square Enix especially with the purchase of Ubisoft which gives it strong backing and take two is a good company i'd say to invest in, so my two would be square enix and take two and maybe even Naughty Dog with the quality of games they make but lack the number of titles to officially be called a world leading company, i'd still invest in them cuz they going to bring greatness within the next few years to come!

Irishhitman27
Irishhitman27

To Tarugista too: They reason Take-Two keeps making the "same boring old games" because they make big bucks GTA4 was the biggest release in history only to be topped by CODMW2, so the two top gaming companies are Take-Two, and Activison Blizzard Co. Which I would rather invest in

thekey
thekey

@Heromoua Well you can bet your bottom dollar that Rockstar won't do that again.(make exclusive content for only one console)

inaka_rob
inaka_rob

I think GTA 4 is the most overrated game of all gaming history. I am not saying its a bad game. I am saying there is no way in hell it should be a 10. There is something called funfactor that just isn't there. Saints Row 2 while not as polished, and a lame story is simply a BLAST to play. Infamous is so addictive to play. Come on you can shoot lighting out of your hand. I had more fun playing Crackdown than GTA4. And Just cause 2 looks like yet another game that will be more fun to play than GTA4. I know GTA4 is suppose to be the realistic sandbox game, but I don't want to die every time i drive into something, and I want amazing weapons, and crazy fast cars that can take a corner at 150 mph. here come the thumbs down.

Zathic
Zathic

They're responsible for Bioshock I'd say that game is pretty innovative.

Trinitarian
Trinitarian

one hit wonder? more like a world serise grand slam in the bottom of the 9th with 2 outs! GTAIV is amasing game. I finally bought that game last night and have played for 16 hours straight YIKES! I haven't dont that since WoW

tycoonmike
tycoonmike

To tarugista: If it were truly games that were Take-Two's problem, then you had may as well question why Square-Enix has been doing well, all things considered. There are thirteen numbered Final Fantasies out there (including X-2 and excluding XI) and, though with different stories and minor changes to game mechanics, one can consider them similar on a level equivalent to the GTA series.

nuttyprof
nuttyprof

This has always been Take-Two's problem. While they have usually made decent to great games, they just can't get the business side right. Say what you will about EA, but they have always understood the business side of the industry.

tarugista
tarugista

Lets not talk about %'s or equations about stocks...TakeTwo is suffering because of the quality of the games...even a 5 year old can figure this thing out. GTA 4 and other games that Take two released this year is the same old boring game that we played over and over again. We consumers bought this games not because of entertainment..but because of the brand name..its time for take two to be innovative again...forget the noobs..giving the noobs what they want is the reason taketwo are in this hellhole...make a new game..a game that will put take two back on top..the way GTAIII did.(back in the day).

KSigMTSU
KSigMTSU

Hedge funds and day traders have fun manipulating the price of this stock. Blizzard delays EVERY SINGLE product they produce, you don't see the same thing happening with their company or anyone calling their management out. This company is being purposefully manipulated for people wanting to play the movement, or by other companies trying to purchase them outright. Also to those saying it is time to buy, you're probably right, the low price for the stock in the last year has been around 5 dollars, but it has been consistently rolling between 7 and 12. Unless something like a buyout occurred, or they filed bankruptcy, it likely will end up back at 12 within a month or two. Imo, buy point is at 7.5, sell is at 11.5. Pretty nice little rolling stock.

airshocker
airshocker

Seems logical to me. "Delaying every game you produce? Fine, we just won't invest in you." Hopefully they fail and companies learn their lessons.

alex19589
alex19589

If Gta 4 would have been better optimized for the PC, more people would have bought it and the result= more sales.More sales, more money, more money, more time to make other projects