Why Take-Two Interactive Software, Inc. Might Keep Sliding

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Take-Two Interactive Software  (NASDAQ: TTWO  )  plunged 11% this morning after the video game publisher's weak fourth-quarter outlook prompted a downgrade -- from outperform to neutral -- from Wedbush Securities.

So what: Along with the downgrade, analyst Michael Pachter planted a price target of $19 on the stock, pretty much exactly where it closed on Monday. While contrarians might be attracted to today's pullback, Pachter thinks investors should remain cautious given Take-Two's lack of visibility.

Now what: According to Wedbush, Take-Two's risk/reward trade-off is relatively unattractive at this point. "[A]lthough Take-Two has consistently produced successful games, it has not produced a sufficient number of them to generate consistent profits," noted Pachter. "In our view, it is impossible to model EPS without knowing the company's lineup and assigning likely revenue levels to each game."

With the stock now off about 16% from its 52-week highs, however, that short-term uncertainty might be providing patient Fools with a juicy long-term growth opportunity. 

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  • Report this Comment On February 04, 2014, at 11:40 AM, mario12345 wrote:

    Brian, your article, is nothing new, in fact its no better use than the tissue they print Andrex on. I hope you find something more creative to spend your time on, otherwise you may put a drag on the credibility of those you attempt to write or paraphrase for. Alan Watts may be your only saviour.

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

8/28/2015 4:00 PM
TTWO $29.78 Up +0.86 +2.97%
Take-Two Interacti… CAPS Rating: ****