Is Take-Two a Good Investment After the GTA V Windfall?

Take-Two Interactive Software (NASDAQ: TTWO  ) has been riding the success of its most successful franchise, GTA V, this year. Shares have already gained close to 24% as Take-Two delivered better-than-expected results driven by robust holiday demand for Grand Theft Auto V, the record-breaking launch of NBA 2K14, and the successful release of WWE 2K14. Additionally, digitally delivered content is also playing a key role in the company's revenue.

GTA V has sold over 32.5 million copies and is still going strong. The game was the fastest-selling title in the history of entertainment products, and it grossed over $1 billion in the first three days after its release. This is impressive performance since the game is only available on PlayStation 3 and Xbox 360, and has yet to hit the PC and new-generation consoles.

But, the question is, can Take-Two continue to perform well this year, despite tough competition from Electronic Arts (NASDAQ: EA  ) ?

Can Take-Two continue its strong performance?
Until now, Sony and Microsoft have sold nearly 10 million units of the PlayStation 4 and the Xbox One, respectively. With gamers eagerly waiting for the game to hit the next-gen consoles and PC, (expected in June) Take-Two will witness another wave of high sales when this officially happens. Apart from GTA V, Take-Two's NBA franchisee is also doing well, as NBA 2k14 was one of the highest-selling games in the month of February. 

Also, the presence of a famous studio such as Rockstar Games is an advantage for Take-Two. The studio's works are seen in 250 million games worldwide, spanning a range of hit games. Again, NBA 2K14 has become the fastest-selling release in the history of the NBA 2K franchise, exceeding sales of 5 million units across consoles and PCs.

In addition, the WWE franchise is another growth driver for Take-Two; The game's sales have exceeded expectations. Take-Two is now supporting the title with add-on content, including a season pass that features several WWE superstars and legends. This is a good strategy, as additional content helps gamer engagement to improve, driving additional revenue and profits.

Take-Two has released downloadable content for several games such as BioShock Infinite, Borderlands 2, and Sid Meier's Civilization V. It has also released nine downloadable offerings in the past 16 months and is planning to release more in the coming months.  

Mobile push
Rockstar Games has released Grand Theft Auto: San Andreas for several leading mobile platforms, as well as iOS and Android. This will enable Take-Two to grow its audience, simultaneously generating additional revenue and profit at a modest cost of development and sans much marketing.

But, Take-Two needs to ensure that the porting of a popular franchise to mobile is done perfectly, unlike what rival Electronic Arts is facing. EA is attacking the mobile gaming market with several popular games such as FIFA 14. But, the company made a mess with Dungeon Keeper and received sharp criticism from gamers who stated that the game is almost "unplayable" until a significant amount of money is spent.

Even Peter Molyneux, developer of the original Dungeon Keeper game, is of the opinion that EA has not gotten the game's balance right, according to BBC. So, Take-Two will be better off if it simply avoids this, and if it does, San Andreas' cult status will push up mobile revenue.

What could come next?
Looking ahead, Take-Two has a robust pipeline of both new intellectual properties and games from its popular franchises, including more than ten unique titles for the next console generation. The initial success of the Xbox One and PS4 is a positive sign for the company. Apart from capitalizing on these new consoles, Take-Two is also investing in emerging platforms such as mobile to deliver more value to shareholders.

During fiscal 2015, Take-Two will focus on next-generation releases from the NBA 2K and WWE franchises. It also has other unannounced titles under development to complement existing games. So, exciting times lie ahead for Take-Two, and investors should continue holding the stock.

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