Upon further review, Take-Two Interactive
Take-Two is once again rebuffing last month's unsolicited buyout offer from Electronic Arts
You can't blame Take-Two for passing. Shortly after EA's offer to buy the company at $26 a share, the company beat Wall Street's expectations and raised its guidance. Now that Take-Two is looking to earn $1.35 to $1.55 a share in adjusted profits on $1.25 billion to $1.4 billion in revenue, EA's exit strategy priced the stock at just 17 to 19 times earnings.
EA, on the other hand, is fetching 28 times forward earnings, and those analyst profit targets have been coming down in recent months -- unlike Take-Two's bottom-line prospects, which are sharply on the rise.
Take-Two has no reason to punch out, especially now that it has hits in its portfolio other than the Grand Theft Auto franchise. BioShock and Carnival Games, for example, will be now be fleshed out with sequels.
Hostile takeovers rarely succeed when the acquisition target is an ascending company that another business is trying to snatch for a pittance. Giant Activision
If a struggling Yahoo!
David Gardner recommended Take-Two Interactive -- twice -- to Rule Breakers subscribers. It was a brilliant call. Investors got in early, before the buyout frenzy. That's the great thing about being an investor: You don't have to pay a premium over the current market price for any stock. Potential acquirers don't have the same luxury, especially when they're trying to steal a company the way EA is apparently trying to, right in broad daylight.
Activision and Electronic Arts are Motley Fool Stock Advisor recommendations. Take-Two is a Rule Breakers newsletter pick. Microsoft has been singled out in Inside Value. Play along with any of these premium newsletter services for the next 30 days with a free backstage pass.
Longtime Fool contributor Rick Munarriz has played a bit of Grand Theft Auto, but not enough to camp out for April's new installment. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.