Take-Two Interactive’s Q2 results shoot past expectations

2018 saw Take-Two Interactive’s [TTWO] share price hit an all-time high of $139.60 at the end of September, a mammoth 2216% gain since it went public in 1997.

Driving this growth has been the publishers focus on quality titles that have a long shelf life.

What happened with Take-Two Interactive’s earnings this quarter?

Coming into Wednesday’s Q2 announcement, analysts had expected revenue to be down 4.7% from this time last year. This is due to more games and in-game content being released at the same point last year, and higher marketing spend in the run up to the release of Red Dead Redemption 2.

When it came to it, total revenue in Q2 came in at $583 million, compared to $550 million expected by analysts. Adjusted earnings per share of $1.05 also stomped on analyst expectations of 93 cents.

During the earnings call, full-year guidance was raised to $2.55 billion to $2.65 billion, up from  the $2.50 billion to $2.60 billion estimated last quarter. This was driven by the runaway success of Red Dead Redemption 2, which did $725 million worth of business over the course of three days and has so far sold over 17 million copies worldwide.

For perspective, Star Wars: The Force Awakens made $529 million in its opening bow and Avengers: Infinity War, the previous record holder, scored $620 million.

At the start of Thursday’s session the share price was at $129.20, a 3% jump from the previous day’s close.

TTWO_YahooFinanceChart
Take-Two Interactive (Source: Yahoo! Finance, 8.11.2018)

How Take-Two Interactive continues to earn money from its games

One of the key metrics that Take-Two has really delivered on is recurrent spending. This measurement gauges how many times a gamer is likely to spend on one game.

In Q2 recurrent spending – that is micro transactions – grew 70% from the same period last year.

Investors will be gauging the reception of Red Dead Online’s public beta this month. GTA V’s online offering has been a continual cash cow for Rockstar Games. If Red Dead Redemption Online can continue to persuade players to spend money on upcoming add-ons, then there could be much more growth left in the stock.

During the announcement, it was also announced that Grand Theft Auto V sales had past 100 million mark. GTA V has had a notorious long-shelf life with its wildly popular online multiplayer.

Five years after its release, the game has continued to be a fixture of the top-ten best sellers list. What makes this more impressive is that the game has done this across two console cycles – making the move from the Xbox 360 and PS3 to the Xbox One and PS4.

When GTA V was released on 17 September 2013, Take-Two’s share price stood at $17.20. Exactly five years later, the share price had climbed to 137.99%, an eye-watering 702% rise.

Where next for Take-Two Interactive’s share price?

For the fiscal year 2019 Red Dead Redemption 2 is expected to drive record results for Take-Two.

Red Dead Redemption 2 has a Metacritic score of 97%, with reviewers praising its painstaking detail, rich characterisation and varied quests. With the lucrative festive season underway, the game should wind up under a few Christmas trees.

The company’s sports brand hasn’t exactly been warming the benches either. NBK2k 2018 was Take-Two’s most successful sports title of all time. With the growth of e-sports, this franchise could also deliver more returns over the long-term for Take-Two and investors.