The industry analysts expect a recession to impact game sales just as it has in past crises, with consumers understandably pulling back on discretionary spending. This macro driven slowdown in the video game industry was highlighted by Bank of America toward the end of September. It’s like the whole pandemic-driven video game demand never happened. For context, shares are trading at where they spent much of 2017. Especially in light of the multi-month sell-off, there’s a strong argument to be made that the worst-case scenario for Take-Two is already baked into the share price. This is a far cry from the lower double-digits investors demand from tech stocks before they wade in, but it’s not an absolute necessity. Take-Two is firmly in that camp, and even after a 50% haircut from last year’s all-time high, it still has a fluffy price-to-earnings (P/E) ratio of 77.
This signals uncertainty for investors and almost always results in dampened demand for stocks, especially the non-cyclicals. It looks like we're in serious correction mode, what with the ongoing cat-and-mouse game between the Fed and consumers and inflation set to continue into next year. Turning the TideĪfter staging a decent rally through most of the summer, equities have since sank to fresh lows, confirming the bulls’ worst thesis. When shares closed on Monday of this week, that points to an upside of around 40%, not a bad number considering how weak the broader market looks. As part of the same move, the team also boosted its price target from $131 to $165. Analyst Eric Sheridan and his team pointed out that the long-term trends should start to emerge in 20 because the company's content pipeline should "result in improved revenue growth and expanding margins" with games moving from development to launch.
Toward the back end of last week, Goldman Sachs upgraded the New York-headquartered company to a "buy" rating, noting that while the near-term situation is fluid, the long-term trends are still strong. It’s true that the video game maker has put in a tough year so far, with shares recently down 40% from January levels, but there are signs that things will change for Take-Two Interactive stock.
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