Its sales growth has been meager in 2023, and its net losses have been significant. And yet Take-Two Interactive's (TTWO 0.72%) stock still trounced the market this year by rising over 50% through early December.
That unlikely rally was sparked by soaring investor optimism around the video game developer's packed content pipeline. Management promised dozens of big franchise launches over the next two years that should help catapult the business to a leadership position in the industry.
One of the most anticipated of these launches is Grand Theft Auto 6, which follows the hugely successful GTA 5 that was released over a decade ago. But GTA 6 won't come out until sometime in 2025, investors have just learned. How might that release update impact the bullish investing thesis? Let's dive right in.
Take-Two's biggest hit
There's no question that Grand Theft Auto is the company's most valuable brand. Developed by its wholly owned game publisher Rockstar Games, the GTA brand has sold 400 million units to date and the most recent installment has sold nearly 200 million units in the decade since it launched. In its annual report, Take-Two describes the brand as a "uniquely original, popular, cultural phenomenon."
The franchise still plays a role in Take-Two's operating results today, highlighting the fact that video games have extended their useful lives well beyond simple annual refreshes. Executives credited GTA 5, along with Red Dead Redemption, as key reasons sales edged past expectations in fiscal Q2, which ran through late September.
Take-Two Interactive's packed pipeline
Take-Two's next year will be extremely busy for launches even without a GTA refresh. The company has 17 major releases in store through fiscal 2026, only three of which have received an official launch date. Investors were hopeful for a quicker release schedule, but they weren't banking on GTA coming out in 2024, too. After all, the company just said in March that development of the title was "well underway."
A slightly longer development time is preferable to rushing a release and then being forced to put out bug fixes. The worst-case scenario here would be for a buggy, low-quality launch title to harm Take-Two's biggest release in a decade and its most valuable franchise.
Looking ahead
While there's still a lot that investors don't know about Take-Two's release schedule over the next 18 months, management has said that the launches should push annual sales up to near $8 billion. Most Wall Street pros agree and see revenue rising by over 40% in the next fiscal year (which begins in early April). Gains of that magnitude would put Take-Two Interactive near Electronic Arts at the top of the video game industry's sales charts.
That doesn't make the stock an obvious buy, though. Take-Two shares are already valued close to EA's price-to-sales ratio even though investors have much less clarity about its growth potential in the coming quarters.
Those questions will be answered as new launch dates are revealed. Yet, as this latest GTA update shows, launch targets are often tentative and subject to delays. Investors should keep that risk in mind when deciding to rely on Take-Two's new releases for a big part of their investing theses.
