What happened
Shares of Take-Two Interactive (TTWO 1.26%) were down 2% as of 11:17 a.m. ET on Thursday. While the negative sentiment in the broader market weighed on stocks today, Take-Two's Zynga mobile game subsidiary scooped up another studio to add to its ranks.
Take-Two stock has sold off in recent weeks on fears that the slowing mobile market might hurt its business following the acquisition of Zynga earlier this year. The uncertainty over integrating Zynga into the business has weighed on the stock, down 44% year to date.
So what
Take-Two completed the acquisition of Zynga in May. Zynga is one of the leading mobile game companies in the world and has a long history of growing through acquisition, and it's continuing that strategy as part of Take-Two.
This time, Zynga's Rollic announced the acquisition of mobile game studio Popcore, the maker of Pull the Pin! and Parking Jam 3D. Both of these titles have been ranked No. 1 in the U.S. Apple App Store for most downloaded games. This deal follows a previous acquisition in September of Storemaven, a leader in mobile app store optimization technologies.
Now what
The market is probably not looking favorably on these acquisitions at the moment, especially after Take-Two's warning in the last earnings report. Management lowered its forecast for fiscal 2023 (which ends in March), partly based on a weakening market for mobile gaming, which relies on advertising as a key part of player monetization.
Moreover, Take-Two took on debt to finance the Zynga deal, which follows a decline in free cash flow this year. In light of these trends, it might take a while for market sentiment to change on this top video game stock.
