Take-Two Interactive (TTWO +2.28%) has some big questions to answer for investors in a few weeks. The video game developer's stock soared through late 2023, but it has trailed the market recently on fears around its slowing growth. Shares are down following management's early February earnings update that outlined weaker demand for some key titles including NBA 2K24.
Yet there's another big update on the way that could change that narrative.
On May 16, Take-Two is slated to announce its fiscal 2024 Q4 earnings results while issuing a detailed outlook for fiscal 2025, which is expected to be a monumental year for the business due to several game-changing releases. A highly anticipated Grand Theft Auto launch is included in that list, but delays could threaten management's growth plan, meaning investors might want to wait for more information before buying this gaming stock.
Switching to defense
Take-Two didn't give shareholders much to celebrate in its fiscal Q3 report (for the quarter ended Dec. 31, 2023). Sales landed right within management's forecast range, sure, but the top line fell 3% year over year, compared to a 2% increase for rival Electronic Arts. Take-Two's content portfolio didn't draw a huge audience during the period, and gamers avoided a few big titles. The latest NBA 2K release stumbled, management said, and soft digital advertising spending pressured its casual gaming division .
NASDAQ: TTWO
Key Data Points
That situation has Take-Two shifting to more of a defensive position ahead of its aggressive content launch plans for the current fiscal year. As a result, investors should look for improvements to metrics like cash flow and operating profit margin over the next few quarters. "We aim to achieve greater operating leverage as we roll out our outstanding release schedule," CEO Strauss Zelnick said in the February press release.
The growth outlook
The bigger question is whether management will satisfy investors with its short-term growth outlook in May. Executives lowered their fiscal 2024 revenue guidance in February from $5.42 billion to $5.30 billion (both figures at the midpoint of their respective ranges).
That shift had nothing to do with Take-Two's content release plans. Still, it was discouraging to see management forced to walk back their near-term forecast. Most of the stock's rally in the past year can be pinned on Take-Two's fiscal 2025 outlook, after all, so investors are nervous about a muted forecast on May 16.
Heading into the report, Wall Street analysts expect fiscal 2025 sales to jump over 30% to $7.0 billion. The timing of a few big releases could make all the difference here. Grand Theft Auto 6, the first new installment for the mega-franchise in over a decade, still doesn't have a firm release date. Management will ideally give investors a better idea of whether that title will still play a major role in fiscal 2025 results, or if delays to that game or others will instead push growth out into future years.
Given Take-Two's falling sales and its streak of losses heading into fiscal 2025, investors might prefer watching this stock from the sidelines for now.
