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Take-Two stock upgraded to get ahead of anticipated blockbuster games on horizon

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Take-Two Interactive Software Inc. outperformed the broader outlook and peers Friday after one analyst upgraded the videogame publisher’s stock, hinting that major title announcements are near.

shares were up 3% in recent activity, while the S&P 500 index was up 0.4%.

In a note titled “Back to the Future,” MoffettNathanson analyst Clay Griffin said Take-Two stock had a “dreadful year” in 2022 as the “market didn’t much care for” the acquisition of Zynga Inc., followed by cuts to its outlook during the year.

Take-Two shares dropped 41.4% in 2022, while shares of Activision Blizzard Inc.
— buoyed by the yet-to-be-closed and contentious acquisition by Microsoft Corp.
— rose 15.1%, and Electronic Arts Inc.
shares declined 7.4%, as the S&P 500 index
fell 19.4%.

Griffin upgraded Take-Two to outperform from market perform and set a $140 price target to “get ahead of a long-awaited content cycle,” which he likened to “back to the future,” where the publisher’s announcement of big titles in the future will drive the stock higher. Yet he recognizes that investors have heard this before.

“We get it,” Griffin said. “Take-Two has been bragging about its pipeline for years; even as far back as the launch of its last great IP, Red Dead Redemption II (2018). Investor frustration has been palpable of late.”

That gap, however, may be telling, the analyst said.

Read more: Take-Two stock sinks as analysts walk off mobile weakness, focus on pipeline

“More time passed means more development, and with capitalized software on the balance sheet surging to nearly $1B, it’s only reasonable to think major announcements are right around the corner,” Griffin said, noting that with the current generation of consoles from Sony Corp.

and Microsoft, gamers are “desperate” for blockbusters to push their new hardware to the limits.

“If past is prologue, when Take-Two sets up its haymakers, they land,” Griffin said. “Mere announcement(s) could propel the shares.”

Take-Two shares have already climbed 10% in 2023, while EA’s have gained 5.8%, Activision Blizzard shares are running flat, and the S&P 500 has gained 6.3%.


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