NBA2K20 Carries Take-Two Interactive to Breakout Quarter
Photo Credit: Take-Two Interactive, 2K website
Earnings recap: Q4 was a strong quarter, with bookings and earnings per share easily topping expectations. Take-Two reported total net bookings of $729 million, up 49% year-over-year. Despite the positive results, investors will likely remain cautious due to weaker-than-expected guidance and a soft pipeline for new games in the next year. Jefferies analyst Alex Giaimo notes that “TTWO is in a unique situation in which a light upfront content year will be cushioned by the COVID uptick in gaming.”
NBA2K20 balls out, even with NBA sidelined: 2K20 has sold over 12 million units, a 33% increase vs. 2K19 in the same period. The company assured investors that a potentially delayed NBA season likely won't impact the success of the upcoming NBA 2K21.
Global appeal: Take-Two is reaping the benefits of the NBA’s exploding popularity in China. NBA 2K Online in China beat the company’s expectations, growing 37% and 25% during the fourth quarter and full year, respectively. The title remains the #1 PC online sports game in China with more than 49 million registered users, according to Take-Two.
Engagement: Daily active users grew 13% and MyTeam users jumped nearly 50% throughout fiscal 2020. During Q4, over 9 million hours of NBA 2K gameplay were watched on Twitch across more than 1,100 channels, representing a 40% increase over the third quarter, according to Take-Two CEO Strauss Zelnick.
Performance of other key titles:
GTA V beat expectations, with 130 million units now sold-in, up from 120 million units as of February.
Red Dead Redemption 2 has now sold over 31 million units.
Borderlands 3 outperformed Take-Two’s expectations in Q4 and the title is now sold-in over 10 million units, up 50% over Borderlands 2 in the same period, according to management.
Pipeline: The company laid out a plan for 93 titles in the next 5 years. Gamers and investors will have to sit tight and be patient, though.
“We have an array of titles that we'll begin to launch in fiscal 2022, which we expect to drive sequential growth that year.” -Take-Two CEO Strauss Zelnick
Expansion into NFL: In March, 2K announced a partnership with the NFL to produce non-simulation football-themed games. It will launch starting in calendar year 2021, during fiscal 2022. It is not expected to compete with EA’s Madden franchise, which remains the exclusive publisher of NFL simulation games.
Take-Two vs. Activision-Blizzard: Both gaming giants have been winners of the stay-at-home trend. Shares of ATVI and TTWO are each up more than 40% from March lows. Jefferies analyst Alex Giaimo maintains his HOLD rating on TTWO and prefers ATVI “given the valuation discrepancy and ATVI's outsized mobile offering (hits a more diverse demographic).” Gaimo has a $135 price target for TTWO, up from $115 prior to the earnings report.
Other analyst action: UBS reiterated its BUY rating and raised its PT to $175 from $140; Wedbush maintained its OUTPERFORM rating and raised its PT to $170 from $131.
