What happened
Take-Two Interactive (TTWO 2.08%) shareholders lost ground this week. The video game developer's stock was down 10% through the market close Thursday while the S&P 500 was up by 1%, according to data provided by S&P Global Market Intelligence.
The slump, which added to Take-Two's significant declines so far in 2021, was sparked by a disappointing earnings outlook.
Image source: Getty Images.
So what
Take-Two on Monday afternoon revealed strong operating results for its fiscal first quarter, which ended June 30. Thanks to robust demand for titles like NBA 2K21 and Grand Theft Auto Online, sales only dipped slightly compared to the booming revenue the company booked in the prior-year period.
But Wall Street was more interested in the developer's stagnant outlook for the rest of 2021. The company's forecast seemed worse in comparison to that of rival Activision Blizzard (ATVI), which later in the week raised its own fiscal year forecast. Take-Two's short-term results are being pinched by delayed game launches, and investors are also worried about a potential slowdown in subscription service revenue.
Now what
Take-Two is still predicting a return to sales growth next year following a modest decline in 2021. And it's good news that management is aiming to get its titles right rather than releasing shoddy content sooner.
But the stock might continue underperforming until the company can reliably accelerate its development pace. A steady flow of high-quality releases is critical to success in the video game business, and on that score, Take-Two has stumbled recently.
