On Tuesday, analysts from Bank of America (NYSE:BAC) (BofA) expressed concerns about the mobile guidance for fiscal year 2025 provided by Take-Two Interactive Software (ETR:SOWGn) (NASDAQ:TTWO).
According to third-party data, there has been a 1% quarter-over-quarter decline in in-app purchases (IAP), which could indicate potential risks to the company's fourth-quarter mobile guidance and fiscal year 2025 projections. These concerns align with InvestingPro data showing 15 analysts revising their earnings expectations downward, despite the stock trading near its 52-week high of $192.14.
The analysts pointed out that, assuming stable advertising revenue, the fourth-quarter mobile guidance, which anticipates at least a high single-digit quarter-over-quarter increase, may be threatened. This is due to third-party data suggesting a decline in IAP, contrasting with Wall Street's expectations of a 4% quarter-over-quarter incline, including advertising revenue.
Furthermore, the tracking of Match Factory, a key game for Take-Two, showed a 10% month-over-month decrease during what is typically the peak month of the year. This suggests that the game's revenue run rate might have reached a plateau. Since August, monthly revenue has not demonstrated significant growth, according to data from Sensor Tower.
The BofA analysts also highlighted that the average daily revenue run rate for Take-Two's mobile segment decreased by 3% month-over-month in December. This decline raises concerns about the company's ability to meet its fiscal year 2025 mobile guidance, which predicts a high single-digit year-over-year increase, unless a major new game is launched in the March quarter.
According to InvestingPro analysis, TTWO's revenue growth forecast for FY2025 stands at 5%, with the next earnings report due on February 10, 2025. Investors seeking deeper insights into TTWO's financial health and growth prospects can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The observations from BofA suggest that Take-Two's performance in the mobile gaming market may not be as robust as previously expected, potentially impacting the company's financial outlook if trends do not improve or if new successful launches do not materialize.
While the stock has shown strong momentum with a 24.54% return over the past six months, InvestingPro analysis indicates the stock is currently trading above its Fair Value, suggesting investors should carefully consider their entry points.
In other recent news, Take-Two Interactive has been gaining the attention of various analyst firms due to its fiscal second-quarter earnings for 2025 and growth projections. BMO Capital Markets has reiterated its Outperform rating on Take-Two shares, raising the price target to $240, largely based on the anticipation of robust sales for the upcoming Grand Theft Auto VI (GTA VI). BMO projects 45 million units sold in the initial Fall 2025 release window.
TD Cowen has also shown confidence in Take-Two, increasing the stock's price target from $176 to $211, citing the potential of GTA VI's online mode. Roth/MKM analysts have similarly raised the company's stock target by $26, reflecting expectations of increased bookings and earnings per share starting in 2025.
These recent developments suggest a positive outlook for Take-Two Interactive, with analysts from BMO Capital, TD Cowen, and Roth/MKM expressing optimism about the company's future. The firm's revenue growth has been steady, with a 5-year CAGR of 15% and current annual revenue of $5.46 billion.
Take-Two Interactive is also planning several major title launches in 2025, including Civilization VII, Borderlands 4, and Mafia: The Old Country. The company's management has hinted at new growth opportunities that could enhance its business model and financial outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.