The wait is almost over for this hit video game. I see 35% upside on the stock
Your favorite tech contrarian is back…and today’s stock pick is a little outside my usual territory. I generally focus on AI infrastructure companies, but I currently see an interesting opportunity in Take-Two Interactive Software, one of the largest video game publishers in the world. The New York-based company is behind hit franchises such as Grand Theft Auto, NBA 2K and Red Dead Redemption. Its biggest hit, Grand Theft Auto V, sold over 230 million copies worldwide, making it one of the best-selling video games of all time. Key Points The long-awaited release of Grand Theft Auto VI could lead to a significant increase in sales and profits. Wall Street underestimates the number of copies of the Take-Two game that could sell. The shares are trading at a discount to the sector’s historical valuation, despite a major growth catalyst on the horizon. Take-Two’s big catalyst is fast approaching: Grand Theft Auto VI is scheduled for release on November 19. Thirteen years have passed since the last installment, and several delays have only added to the anticipation. I think investors are underestimating the demand for this game and I see significant upside potential for the stock over the next couple of years. Grand Theft Auto VI management projects sales of approximately 30 million copies of Grand Theft Auto VI in its first year. We’re modeling 37 million, and I think sales could go even higher. Part of this opportunity is management’s traditionally conservative approach to guidance. Take-Two tends to set expectations that it believes it can meet or exceed, rather than making overly ambitious promises. This caution has contributed to Wall Street underestimating the game’s sales potential. Profit growth could accelerate sharply. The company generated approximately $6.7 billion in revenue in fiscal 2026, which ended March 31. Revenue is expected to reach approximately $8.5 billion in fiscal 2027, an increase of approximately 27%. But the real payoff could come the following year. Earnings per share are expected to increase from $6.97 in fiscal 2027 to $10.32 in fiscal 2028. This represents an increase of almost 50%. As sales of Grand Theft Auto VI increase, Take-Two could see a substantial improvement in profitability. If demand exceeds expectations, as I believe it will, profits could rise further. Stock Appears Undervalued Despite the excitement surrounding Grand Theft Auto VI, Take-Two isn’t trading at the premium valuation one might expect. TTWO year-to-date Take-Two Interactive Software, Inc.’s year-to-date shares are trading at around 21 times forecast adjusted earnings for fiscal 2028. That leaves room for the stock to climb if Grand Theft Auto VI generates the growth we expect. I still see an opportunity here. Investors are exposed to one of the most important video game launches in history, and I think the market has yet to fully appreciate the earnings growth it could generate. Why now? With shares recently trading around $212, our two-year price target of $293 implies an upside of about 35-40%. This is an interesting opportunity to buy the title before the full impact of Grand Theft Auto VI becomes clear. In summary The biggest risk is that Grand Theft Auto VI will not live up to expectations. A further delay or disappointing sales could hurt Take-Two’s earnings outlook and put pressure on the stock. As I said, Take-Two is a different type of game for me, but sometimes the best opportunities are outside of your usual investing playbook. With a blockbuster launch approaching and shares trading at a discount, I see a path to our price target of $293 over the next two years. Paul Meeks is Managing Director and Head of Technology Research at Freedom Capital Markets. Disclosures: Meeks does not own any shares personally or through the company. Any opinions expressed by (CNBC Pro contributors) are solely their opinions and do not reflect those of CNBC, its parent company or its affiliates, and may have been previously broadcast by them on television, radio, the Internet or other media. This content is provided as part of our editorial production for informational purposes only and does not constitute financial, investment, tax or legal advice, nor a recommendation to purchase securities or other financial assets. The content is general in nature and does not reflect the unique personal situation of any individual. The content above may not be appropriate for your particular situation. Before making any financial decision, you should seriously consider seeking advice from your own financial or investment advisor. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITIES OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF ANY INDIVIDUAL. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Gn tech
