I don't envy Take-TwoInteractive
Not in the sense of "missing estimates," mind you. But in the sense of being drastically worse numbers than Take-Two posted a year ago. According to the consensus estimates released by the 20 analysts following the company, Take-Two is believed to have earned no more than 33% of its Q4 2004 profits in Q4 2005. And if the full-year picture is brighter, it's only relatively so. Analysts believe Take-Two's profits dropped by 40% this year.
Granted, with expectations set so low, there's certainly the possibility that Take-Two will turn in an "upside surprise." Or report the expected abysmal numbers for Q4, but promise nirvana in the coming year. With nearly 20% of the company's float sold short, either of those outcomes could turn the expected rout into a short squeeze in, well, short order. Indeed, almost any good news has the potential to send this company's shares rocketing.
But don't bet on it.
Take-Two's share price has declined by 20% over the last year. This being in the context of a broader market that has performed relatively well, rising 7% in the same 52 weeks. Yet as their stock tanks, Take-Two insiders -- the people who know the company best -- aren't buying the shares hand over fist; to the contrary, they're bailing out. Over the last six months, insider holdings are down by more than 40%; at present, insiders apparently have so little faith that they own less than 1% of the shares of this relatively tiny, $1.3 billion company.
After a series of three earnings warnings, culminating in November's expectations walk-back to profits of $0.53 to $0.56 per share, you can't really blame the insiders for abandoning ship. They like losing money just as little as do you or I. When you combine Take-Two's own product delay-issues with the anemic gaming software market caused by (1) gamers' hoarding of cash as they await new platform releases from Sony
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Fool contributor Rich Smith has no position, long or short, in any company named above.