By Michael Elkins
Shares of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) are down more than 3.5% in mid-day trading Wednesday after the company was downgraded to Hold at Deutsche Bank following its 1Q23 earnings results and guidance updates.
A Deutsche Bank analyst based the downgrade decision on what he sees as a “balanced risk/reward outlook this year.” An outlook due, in part, to a weakening macro backdrop. The analyst also sees a “lack of material near-term catalysts over the next few quarters.” However, he remains constructive on the company's long-term growth outlook.
Following TTWO's updated 2023 guidance, the analyst now believes that the company’s significant content pipeline won’t begin to contribute materially until next year. In May, TTWO guided bookings from full game sales to grow 32%. With the company’s updated guidance, Take-Two shifted ~$330M in net bookings out of the FY23 release slate (due to game delays), implying that full game sales will only grow 5% y/y.
The analyst believes that investors might have to wait another few quarters before getting significantly more disclosure about the long-term pipeline opportunity. But he remains confident in the company’s long-term plans, including the Zynga deal, which is still largely intact, saying that the company’s long-term targets imply a meaningful 34% step up in growth for TTWO’s core business next year.