Should You Buy-the-Dip in Take-Two Stock?

Take-Two Interactive (NASDAQ:TTWO) has grown into one of the most successful video game publishers in existence. This is largely due to the contribution from its celebrated subsidiary, Rockstar Games.

Just over the past decade, Rockstar has published the first and second largest entertainment launches of all time – GTA V and Red Dead Redemption 2.

Shares of Take-Two have dropped 10.6% over the past month as of close on February 14. The stock took a hit after the departure of Rockstar co-founder Dan Houser. Houser has been a major creative contributor to Rockstar’s biggest franchises, including GTA, Max Payne, and Red Dead Redemption.

His brother, Sam Houser, who is currently president of the company, has not announced any role change.

Rockstar has received praise for its incredible technical achievements in building virtual worlds, but it is also renowned for its strong characters and storytelling. Houser has played a crucial part as lead writer on Rockstar’s biggest hits. There is some concern that his departure could impact the strength of Rockstar’s writing going forward.

The company’s stock also took a hit after a less-than-stellar third quarter 2019 report in early February. GAAP revenue fell 30.1% year-over-year to $930.1 million and net income decreased to $1.43 from $1.57 in Q3 2018.

Investors do have the release of GTA VI to look forward to, which should come sometime in the first half of this decade. GTA V was the best-selling entertainment product in history.

Take-Two boasts an immaculate balance sheet and revenue is forecast to post solid growth going forward. However, even after the post-earnings dip the stock is pricey. Value investors should continue to wait for a more attractive entry point.

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