Early retirement is the dream. But punching out early from your working years doesn't happen by accident. It takes a consistent investment plan and some great stocks along the way.
Game studio Take-Two Interactive (TTWO +0.26%) could be a stock to help your portfolio reach that finish line. A renowned industry leader with fantastic growth prospects awaits investors.
Here's what you need to know.
A five-star portfolio of intellectual property
Take-Two Interactive is an independent studio that develops games for consoles, computers, and mobile platforms. It's behind notable gaming franchises like NBA 2K, Red Dead Redemption, and Grand Theft Auto. It acquired major mobile game developer Zynga last year for over $12 billion, adding dozens of games, including FarmVille, Words With Friends, Empires & Puzzles, and more. Collectively, Take-Two generated over $5.4 billion in trailing-12-month revenue.
Gaming is potentially a prime sector for long-term investors. Unlike television and music, which may have hit the limitations of their technology (you can't do anything besides watch and listen to traditional media), gaming is interactive. Technology has given gaming more capability over time. You can play games on mobile or consoles or computers. High-speed internet has created online gaming. Now, virtual reality is making gaming more immersive than ever before.
NASDAQ: TTWO
Key Data Points
The global gaming market could grow over 13% annually through the rest of the decade, hitting nearly $600 billion by 2030, according to Grand View Research. In that scenario, an estimated 3.32 billion people worldwide will be gamers. Having top-notch content like Take-Two Interactive does opens the company up to that rapid growth.
A generational game is on the way
Take-Two's recent announcement and trailer release for Grand Theft Auto VI is a testament to the point above. The trailer has a whopping 148 million views on YouTube in the 10 days since its release. For reference, the trailer for the last game in the series, Grand Theft Auto V, was released 12 years ago and has just 105 million views.
Grand Theft Auto V passed 400 million lifetime units sold this year, and the decade-plus wait and obvious hype around the trailer signal the next game could do just as well or better. The game has no formal launch date, just a 2025 release window. Still, analysts are already calling for 41% revenue growth in 2025.
The great thing about intellectual property is that it can be repurposed to create new growth opportunities. A successful franchise is like its own brand. The new Grand Theft Auto will likely feature different characters and plot lines from the prior games, but it's still Grand Theft Auto. There will almost assuredly be future installments of Grand Theft Auto, Red Dead Redemption, and other hits that can single-handedly elevate the company's growth.
The revenue chart is lumpy in between major releases, but the long-term trend is clear:
Data by YCharts.
Projecting Take-Two's long-term upside
Anticipation of the new Grand Theft Auto and a more bullish broader market has lifted shares to their highest price in roughly a year. Today, the stock trades at a forward P/E of 52. Analysts expect long-term earnings growth to compound at 31%. Investors should expect some volatility because the release cycle of major games makes Take-Two a somewhat cyclical business.
Data by YCharts.
That's less of an issue for long-term investors who want to see a company create shareholder value over time (Take-Two stock has easily outperformed the S&P 500 over the past decade). The stock's valuation has risen consistently throughout 2023, but it's not absurdly expensive with a PEG ratio under 2.
The market has been on a roll recently, and the Grand Theft Auto hype is hot. Investors waiting for the market and hype to cool off might get a better buying opportunity. Nonetheless, Take-Two should be watched as a potential game changer in any long-term investor's portfolio.
