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Why Shares of Take-Two Interactive Software Were Down Today

By Timothy Green - Updated Feb 8, 2018 at 4:31PM

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A mixed third-quarter report, which came a few days after a major game delay, has put a damper on the stock.

What happened

Shares of Take-Two Interactive Software (TTWO -1.11%) slumped on Thursday following a mixed fiscal third quarter. Take-Two fell short of revenue expectations while producing higher earnings than anticipated. The recently announced delay of Red Dead Redemption 2 could also be weighing on the stock, which was down about 11% at 3:35 p.m. EST.

So what

Take-Two reported third-quarter revenue of $480.8 million, up from $476.5 million in the prior-year period but below the $493 million analysts forecasted. Net bookings totaled $653.9 million, down from $744.8 million in the year-ago period.

A screenshot from the upcoming Red Dead Redemption 2.

A screenshot from the upcoming Red Dead Redemption 2. Image source: Take-Two Interactive.

Recurrent consumer spending, which includes virtual currency, add-on content, and microtransactions, jumped 64% year over year to account for 32% of total revenue. Grand Theft Auto V and Grand Theft Auto Online were key contributors. Digitally delivered revenue grew 8%, accounting for 54% of total revenue.

Earnings per share came in at $0.21, up from a loss of $0.33 in the prior-year period. Analysts estimated a loss of $0.10 per share. A 50% drop in software development costs and royalties compared to the third quarter of fiscal 2017 was responsible for the surge in earnings.

Take-Two guided for fourth-quarter revenue to land between $460 million and $510 million, along with net bookings between $410 million and $460 million. The company is looking for EPS between $0.73 and $0.83. For the full year, it sees revenue between $1.8 billion and $1.85 billion, net bookings in the range of $1.99 billion to $42.04 billion, and EPS from $1.50 to $1.60.

Now what

Take-Two announced on Feb. 1 that the highly anticipated Red Dead Redemption 2 from Rockstar Games would be delayed from spring 2018 to Oct. 26, 2018. However, it boosted its full-year guidance despite this setback.

The company's major franchises, like Grand Theft Auto, have long development cycles. Grand Theft Auto Online has helped smooth things out, and there are high hopes that Red Dead Redemption 2 Online will be just as successful. Investors will now need to wait until later this year to see if Take-Two has another blockbuster hit on its hands.

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