Video game publisher Take-Two Interactive Software (TTWO) received a bullish report from a Wall Street firm on Monday, based on the company’s strong outlook for the rest of this year and next.
BMO Capital Markets analyst Gerrick Johnson reiterated his outperform rating on Take-Two and lifted his price target to 135 from 125.
Take-Two shares were up 2.4%, near 118.40, in afternoon trading on the stock market today.
“Of the video game companies we cover, we think Take-Two stands to benefit the most from positive video game industry tailwinds, including the transition to digital distribution offering higher margins and the opportunity for incremental add-on sales and multiplayer online services,” Johnson said in a note to clients.
The most important aspect of the digital transition for Take-Two has been that it has allowed the company to smooth out its once highly volatile earnings stream by monetizing hit game franchises like “Grand Theft Auto” and “NBA 2K” well beyond their initial releases, he said.
IBD’S TAKE: Take-Two Interactive Software stock has an IBD Composite Rating of 96, meaning it has outperformed 96% of stocks in key metrics over the past 12 months. For more analysis on Take-Two and its peers, visit IBD Stock Checkup.
“In the past, the knock against the company had always been that it was overly reliant on just a few games, most notably ‘Grand Theft Auto,’ creating a lumpy, unpredictable, and risky earnings stream,” Johnson said.
“But in the digital era this is a competitive advantage,” he added. “By having some of the highest-quality games, and periodically dropping additional content, Take-Two can keep its players engaged and spending in its games without having to reinvent the wheel every 3-5 years. The company’s earnings stream is now predictable, reliable, and much less risky.”
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