Shares of Take-Two Interactive (TTWO -0.46%) have been trending higher over the past year. The company has reported solid sales from its roster of video game franchises, led by one of the most popular brands in gaming, Grand Theft Auto.
Take-Two stock is gaining attention on Wall Street as the launch date of the next installment in the Grand Theft Auto series emerges on the horizon. Grand Theft Auto V, the current iteration of the series, was released in 2013 and has sold over 215 million copies. The stock doubled within three years of that release and went on to deliver an incredible 1,230% to date.
Should you buy the stock now? While Grand Theft Auto VI is currently slated to release in May 26, 2026, there appears to be tremendous pent-up demand from players. We'll take a look at how much revenue Grand Theft Auto VI (GTA VI) could generate for Take-Two over the next few years and where the stock could trade by 2028.
Image source: Getty Images.
Wall Street expects record revenue
The GTA series has seen several releases over the last few decades. It is one of the best-selling franchises of all time, selling a cumulative 450 million copies. Each new release has expanded the popularity of the series.
With the current version of the game selling significantly more copies than previous releases, the next release will be selling into a huge built-in fan base. The viewership numbers of the second trailer released for GTA VI were a record 475 million within the first 24 hours, fueling high expectations for sales.
The 2013 launch of GTA V was a milestone event for Take-Two's financials. The company's revenue nearly doubled from $1.2 billion to $2.3 billion in fiscal 2014. Considering the game's growth in popularity, the next release could generate even higher sales.
Wall Street's consensus estimate has Take-Two's non-GAAP revenue, or bookings, hitting $9 billion by fiscal 2027 (which ends in March), up from $5.6 billion for the recent fiscal year.
TTWO Annual Revenue Estimates data by YCharts.
Where will the stock trade in three years?
There's always a risk that a video game's release could have lower-than-expected sales. But new releases for existing franchises are generally safe bets, especially a franchise of this magnitude. Management credited strong player interest in the current GTA game for contributing to the 17% year-over-year increase in bookings last quarter.
The stock could outperform the broader market over the next three years. It trades at a price-to-sales (P/S) multiple of 7, which is below the 8.5 sales multiple that Microsoft paid for Activision Blizzard a few years ago. With Take-Two on the verge of record sales, you could argue the stock is undervalued.
Assuming the stock continues to trade around the same P/S multiple, the share price could climb in proportion to the company's revenue and bookings, which tend to parallel each other. The fiscal 2027 bookings estimate is 60% higher than Take-Two's trailing-12-month bookings, and analysts expect a slight dip in sales without a major release in fiscal 2028. Overall, investors can reasonably expect the stock to return around 50% from current share prices over the next three years.
But investors should also consider the downside scenario if GTA VI sales don't pan out. The stock traded under 4 times sales in the 2022 bear market, which is a peak scenario for investor pessimism. If Take-Two's bookings come in $1 billion short of expectations, or $8 billion in fiscal 2027, which would be a severe miss, and the stock is trading at 4 times sales, that would lead to over 20% downside from the current $225 share price.
A bigger sales miss would add to the downside, but I believe Take-Two is more likely to exceed rather than miss estimates. Rockstar Games, the Take-Two subsidiary that develops GTA, has a sterling reputation for releasing quality gaming experiences that are entertaining for players.
The stock is not a screaming buy, but it has a good chance of outperforming the broader market. Keep in mind, management has several other releases planned to drive shareholder returns. It's also focused on being disciplined in managing costs to improve profit margins, so Take-Two could be a rewarding investment for the next few years and beyond.
