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Why Shares of Take-Two Interactive Are Down Today

By Lou Whiteman – Feb 7, 2020 at 11:45AM

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The holiday quarter fell well-short of expectations.

What happened

Shares of Take-Two Interactive Software (TTWO) fell more than 10% on Friday morning after the video game giant posted weaker-than-expected results during the holiday quarter. The company sounded an optimistic tone about its pipeline and future prospects, but investors were in no mood to hear it.

So what

Take-Two, owner of game franchises including Grand Theft Auto, Civilization, and Red Dead Redemption, after markets closed Thursday reported fiscal third-quarter earnings of $1.43 per share, well short of the $1.75-per-share analyst consensus. Net bookings for the quarter came in at $888.2 million, short of analyst expectations and down 43% year over year.

Group of friends play video games together.

Image source: Getty Images.

Analysts had been expecting year-over-year comparisons to be difficult because Take-Two last year benefited from the launch of Red Dead Redemption 2, but they hadn't expected numbers to fall as much as they did. For the full fiscal year, Take-Two expects to earn between $3.38 and $3.58 per share. Analysts were expecting $4.86 per share.

Investors were already on edge due to the pre-earnings announcement that Dan Houser, one of the creative forces behind many of Take-Two's games, would be stepping away from the company.

Now what

Strauss Zelnick, chairman and CEO, in a statement said, "Take-Two's development pipeline over the coming years is the largest and most diverse in our history, including releases from our largest franchises, new IP and a broad mix of gameplay experiences, all designed to captivate and engage audiences well beyond initial release."

The question is how quickly that pipeline can produce a new hit that gets earnings, and the stock, moving in the right direction. Traders on Friday are betting that they can find better growth elsewhere.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Take-Two Interactive. The Motley Fool has a disclosure policy.

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