Take-Two clobbered on Wall Street

Analysts bum-rush the publisher following earnings warning, sparking sell-off; stock down more than 15 percent.


Today on Wall Street, Take-Two Interactive (NASDAQ: TTWO) took a drubbing worthy of The Warriors, its just-released beat-'em-up action game. Following yesterday's one-two punch of lowered guidance and delay announcements, analysts ganged up on the publisher, pummeling it with a battery of negative reports.

Investment firms Bear Stearns, Janco Partners, and Wedbush Morgan all downgraded Take-Two's stock to "peer perform," "accumulate," and "hold," respectively. "We are at a loss to explain the company's consistent failure to execute," read a report from Webush analyst Michael Pachter.

Even more discouraging was the consensus among analysts that there is even more bad news down the road. "We continue to see no positive catalysts over the next six months," said Pachter. "The company’s FY06 guidance implies that the bulk of its net income will be earned late in the year, without commitment to the next installment of the GTA franchise." UBS' Mike Wallace concurred, saying, "We still think FY06 guidance and FY06 Street numbers are too high."

After agreeing with his counterparts, FBR Research's Shawn Milne had even harsher words for Take-Two, dismissing the company's claims that "cautious" US retailers were partially to blame for its woes. "We believe this is more company-specific than market-driven," said Milne.

Of all the major analysts, only Piper Jaffray's Anthony Gikas gave Take-Two anything close to a vote of confidence. "Today we find ourselves stuck with an Outperform rating on TTWO," he wrote in his note. "We are electing not to downgrade TTWO shares and think today could represent the [near-term] bottom to the stock." However, Gikas bluntly stated that he and his colleagues were none too thrilled with the publisher, saying, "We are not big fans."

When the closing bell rang this afternoon, the impact of Take-Two earnings warning became clear. On heavy trading--more than 10 million shares changed hands, 10 times the average volume--the publisher's stock lost more than 15 percent of its value, or some $3.12 per share. When the dust cleared, Take-Two's stock price stood at $17.53, its lowest point in more than a year. As of press time, the company had only recovered a nickel per share in after-hours trading.

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