While the stock market has rallied this year, resurgent macroeconomic risk factors, including inflation and rising interest rates, have prompted pullbacks for several stocks over the past two months. With volatility rearing its head again, now could be a good time to build positions in top companies with significant long-term growth potential that happen to be seeing stock price dips at the moment.
Investors, of course, should be selective about which businesses they put their money behind. But backing the right players can put you on a path to market-crushing payoffs. With that in mind, read on for a look at one top stock with a massive performance catalyst on the horizon that's currently trading down 35% off its all-time high.
This category leader has strong foundations
Take-Two Interactive Software (TTWO 0.72%) is one of the leading players in the video game industry. The interactive entertainment giant houses multiple top-tier development studios, and it also handles some game publishing and distribution duties for studios that aren't under its corporate umbrella.
The company owns 14 franchises with individual titles for consoles and PCs that have shipped at least 5 million units. On mobile, the company owns 16 out of the top 200 of last year's highest-grossing games.
While Take-Two has a variety of successful franchises and development resources, there's no question that the company is best known for its Grand Theft Auto (GTA) franchise. In particular, Grand Theft Auto V has been an incredible performer and is one of the most successful entertainment products ever.
Released in 2013, the game has been kept active through regular updates to its online mode and updated versions for new gaming consoles and more advanced PC hardware. GTA V had shipped 185 million copies worldwide at its last reported tally, and it has also continued to generate high-margin revenue through its Grand Theft Auto Online multiplayer service.
Image source: Take-Two Interactive.
As great as GTA V's performance has been, the industry-defining game has finally started to slow down. But the good news is that Take-Two investors have something major to look forward to.
The publisher will likely be releasing Grand Theft Auto VI within the next couple of years, and the upcoming sequel is poised to be another game-changer.
Take-Two is on the verge of leveling up again
Based on statements from Take-Two's most recent quarterly conference call and subsequent comments from CEO Strauss Zelnick, GTA VI will likely launch at some point between April 2024 and March 2025.
For the current fiscal year, which ends March 2023, Take-Two expects to record bookings between $5.45 billion and $5.55 billion. But for its next fiscal year, the publisher is guiding for over $8 billion in bookings -- good for annual growth of roughly 45.5% compared to the midpoint of this year's guidance range.
The company is also guiding for more than $1 billion in non-GAAP (adjusted) unrestricted operating cash flow next year, and it anticipates that results will be even stronger in the following fiscal year and beyond.
Along with other hints, this guidance strongly suggests that Grand Theft Auto VI will be launching before March 2025. While matching GTA V's record-setting performance is a tall order for the upcoming sequel or any other entertainment product, it's virtually certain that the new game will go on to be a huge hit.
GTA VI will be much more than just a game for Take-Two
Crucially, Grand Theft Auto VI will almost certainly not be a one-off performance driver. Like its predecessor, the upcoming sequel is likely being positioned to have a decade-long lifecycle. In that sense, the upcoming release and its online mode will be much more than a typical game.
Rather than thinking of Grand Theft Auto VI as a simple video game, it probably makes more sense for investors to conceptualize the impending installment as a platform. Depending on how you slice it, the current iteration of Grand Theft Auto Online could already be considered one of the most successful metaverses released so far.
Grand Theft Auto Online's frequently evolving virtual world is home to a variety of different game types and activities, it's played host to popular celebrities including Dr. Dre, and it's successfully kept a large user base engaged for roughly a decade. The version of the franchise's online mode that launches with Grand Theft Auto VI will almost certainly take these elements to new heights.
Between combined revenue from unit sales and in-game purchases stemming from its online virtual world, GTA VI is positioned to be a powerful long-term earnings generator for Take-Two Interactive. With the stock still trading at big discount compared to its high, now looks like a good time to build a position in the gaming leader.
