Analyst: Take-Two to make grim guidance

Wedbush Morgan analyst Michael Pachter forecasts 40 percent year-on-year earnings drop for the Grand Theft Auto publisher, in line with its cautious forecast.

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Tomorrow, Take-Two Interactive will announce its earnings for the first quarter of its 2006 fiscal year, which ended on January 31. While the actual numbers won't be made public until the afternoon, Wall Street analysts are already prognosticating how the publisher did during the all-important holiday season.

One of the most respected game-industry analysts, Wedbush Morgan Securities' Michael Pachter, sent out a note today warning Take-Two investors to "expect another weak quarter." Not that such news would be a surprise. "We expect the company to report Q1 results in line with its guidance for revenues of $230 to $250 million," wrote Pachter, who also predicted a $0.14 net loss per share.

Anyone familiar with Take-Two will likely be able to guess why the publisher's November 2005 to January 2006 quarter wasn't as good as its November 2004 to January 2005 quarter. The earlier period began just days after the company's Rockstar Games subdivision shipped Grand Theft Auto: San Andreas, one of the best-selling games of all time. The latter period saw another Take-Two label, 2K Games, release several Xbox 360 launch titles and came after the launch of the top PlayStation Portable title to date, Grand Theft Auto: Liberty City Stories.

Apparently, the newer games' combined sales made much less money than San Andreas did solo, however. "NPD US retail video game software sales data for the January quarter implies that Take-Two's sales are down 40 percent compared with the prior year quarter," wrote Pachter.

With his assessment of Take-Two's finances remaining grim, Pachter is maintaining his hold rating in the company's stock. "We think that Take-Two will continue to face a challenging retail environment over the next six months," he wrote. "As we see no positive catalysts over the near term, we recommend that investors stay on the sidelines for the next few months until Take-Two can demonstrate that it can deliver on its guidance. We are maintaining our hold rating and our $15 price target." Today, the company announced a new next-gen sports title, Table Tennis for the Xbox 360.

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