How High Will "GTA V" Push Take-Two Next Week?

Image source: Take-Two Interactive.

In a few days, Take-Two Interactive (NASDAQ: TTWO  ) will officially start ringing the register on Grand Theft Auto V. Profits from the blockbuster game hit the company's books this week, and we'll finally get details on the title's performance when earnings results are announced on Tuesday, Oct. 29.

So far, Take-Two has been fairly mum about GTA V's stats, saying only that sales passed $800 million on the first day of availability. That's a huge achievement, but it looks like it was just the beginning of what will be an epic run for the game.

By Guinness World Records' count, for example, GTA V hit $1 billion in sales by its third day on the market. By comparison, it took Activision Blizzard (NASDAQ: ATVI  ) 15 days to set the (now broken) video-game launch record last year with its Call of Duty Black Ops II release. Most estimates see sales of Take-Two's hit to pass 20 million copies this year, which would push the Grand Theft Auto franchise well into "iconic" territory, at 150 million units overall.

Struggling to catch up, analysts have been racing to upgrade their profit forecasts for next week. Two months ago, the average earnings estimate was $1.38 a share, which would be a huge improvement over the $0.18 loss Take-Two booked a year ago. By last week, analysts had changed their tune, expecting $1.50 in profits instead. And currently the earnings estimate sits at $1.64. Companywide sales are expected to come in at $910 million, more than three times the prior year's results. With rapidly rising expectations like that, it's no wonder the stock is up 60% so far this year.

But even if Take-Two surprises to the upside next week, the big question for investors is on how that momentum could continue. Unlike perennial hits such as Electronic Arts' FIFA and Activision's Skylanders, the GTA franchise is not on a yearly, or even regular, release schedule. In fact, the last major installment in the series, GTA IV, came out five years ago. That kind of a break between launches allows pent-up demand to build and gives developers more time to craft a great product. But it also sets the stage for very choppy business performance.

You can see the difference by comparing the change in Take-Two's annual profits with Activision's. While Activision's earnings have improved more or less steadily over the past five years, Take-Two's have been on a much bumpier ride.

ATVI Gross Profit (TTM) Chart

ATVI Gross Profit (TTM) data by YCharts.

And swings like that could get worse, especially around this time next year, when Take-Two will probably be suffering through a huge GTA-induced sales hangover.

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