Shares of video game publisher Take-Two Interactive(NASDAQ: TTWO) went up 18.3% in November, according to data provided by S&P Global Market Intelligence. The company reported financial results during the month that weren't very good. But the stock went up anyway because the market is looking past this most recent quarter to its upcoming pipeline of video game titles.
The numbers that Take-Two reported on Nov. 8 were objectively bad. The report covered the fiscal second quarter of 2024, showing a 7% year-over-year drop in net revenue and a huge net loss of $543.6 million. Moreover, management maintained its full-year revenue guidance but lowered its expectations for full-year profits.
Wall Street didn't seem to care, with most analysts upgrading their outlooks for Take-Two stock. For example, Benjamin Soff of Deutsche Bank upgraded his outlook from hold to buy on Nov. 14, according to TipRanks. And he didn't cite the company's numbers. Rather, Soff pointed ahead to the upcoming release of Grand Theft Auto VI for his bullish outlook.
Grand Theft Auto VI isn't the only game title that Take-Two is preparing to release -- the company has seven other major games coming in the next couple of years. The hope is that a strong lineup will lead to a surge in excitement from gamers, who will spend more money. And that's why Take-Two stock was up in November despite lackluster financial results.
Making it through fiscal 2024
Take-Two's fiscal 2024 started in April and goes through March 2024. I don't want to portray it as a dying company, because nothing could be further from the truth. Growth is lackluster, with full-year revenue only expected to grow by 2% year over year at most. But management is guiding for its revenue to be at an all-time high in fiscal 2024 -- that's impressive, considering the video game business is soft right now.
That said, fiscal 2024 is an expensive year for Take-Two Interactive. Games don't make themselves. At the start of this fiscal year, Take-Two had about 8,900 people working in its development studio. Many of these workers are from Zynga, which was acquired by Take-Two. But still, this development studio head count has more than doubled since the start of fiscal 2021.
Take-Two needs more people if it's going to launch its pipeline of games. But this increases operating expenses, and it's a big reason why management expects a full-year net loss of $910 million to $957 million.
Looking ahead to fiscal 2025
Whereas it expects bookings of about $5.5 billion in this fiscal 2024, Take-Two's management believes its pipeline of games can allow it to hit $8 billion in bookings in fiscal 2025. That would be huge growth and, again, this is what the market is getting excited about.
The trailer for Take-Two's Grand Theft Auto VI leaked at the beginning of December and set a YouTube record for views in 24 hours. Therefore, it seems like the excitement is truly building for what this company has coming in the near future.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Take-Two Interactive Software. The Motley Fool has a disclosure policy.
