Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

CAPS Rating: 4 out of 5

The Company is a global publisher, developer and distributor of interactive entertainment software, hardware and accessories.


Player Avatar TheStankometer (< 20) Submitted: 1/25/2011 12:14:59 AM : Underperform Start Price: $12.88 TTWO Score: -56.68

'Twas on 1/10/11 when I smelt upon yet another stinker in the video game industry. The culprit was Take Two Interactive Software... maker of modern classics like Grand Theft Auto as well as sports games like NBA 2K11. This company has a track record of great games... and it saddens me to have to give them a down thumb... but that's what I'm gonna do. TTWO only scored 32 out of 100 Smelloscope points ranking it within the bottom 10% of stocks I've scored.

Here's why:

-Negative ROE%, ROA%, and net profit margin with a terrible 5 year trend
-Low unstable gross margin
-Debt to equity ratio is trending slightly up over the last 5 years
-Decreasing book value per share over the last 5 years
-Negative insider activity

The bottom line:

I'm a big fan of some of the games this company makes. And I think over the long term Take Two Interactive might have potential to turn things around... because their games are THAT good. But the video game market as a whole is still going through major growing pains.

Game studios are akin to pop bands. They live and die off of their "hits". They need to stay hip and ahead of the curve CONSTANTLY or they will be replaced. Plain and simple. And just like the music industry... piracy is running rampant in the software sector. Even when a studio creates a great game... they still have to worry about half of their fan-base stealing it.

TTWO has released many successful games in the past, and I expect that they will be a mainstay in the industry for many years to come. But until the video game market grows up a little bit, I think I'll keep my money away from mid-tier companies like this one.

Sorry Take Two Interactive... I love your games, but your fundamentals stink.

(official nose of the Stankometer)

Full Discloser:
I don't own a long or short position in TTWO but I do own one of their competitors: Activision (ATVI)
TheSmelloscope is a value rating system created to evaluate stocks for fun. It is operated by a novice investor named djshagggyd. NOVICE being the key word. Do not follow the Stankometer's advice without conducting your own research.

Report this Post 3 Replies
Member Avatar platinumatt (< 20) Submitted: 1/30/2011 4:23:03 PM
Recs: 0

First of all, the insider activity is positive, NOT negative. Carl Icahn has built up a huge stake in this stock over the past year or so. He continues to hold.

Also, I don't think this stock is good to judge based on a five year peiod. It's a stock that you buy and sell within the year, usually. it goes up when a good game is released and goes down in the subsequent quarters.

- long on ttwo

Member Avatar TheStankometer (< 20) Submitted: 1/31/2011 4:56:57 PM
Recs: 0

H. Goldstein, L. Goldstein, S. Krauss, and M. Sheresky all sold shares in December of 2010. That's the negative insider trading I was referring to. You're right that C. Icahn made a large purchase in Sept. 2010 and continues to hold onto his shares. I personally wouldn't call the insider trading trend positive... but you probably know more about this company and it's insiders than i do.

I'm not interested in buying and selling stocks within the same year unless it's a necessity... that's why for my purposes I gave it a thumbs down. I am looking for investments that are likely to increase in value steadily over a 5 to 10 year period... I don't have the time, intelligence, or patience for day trading.

Thanks for the input though platinumatt! If you have any other thoughts I'd love to hear them.

(official nose of the Stankometer)

Member Avatar pjgz (43.59) Submitted: 4/15/2011 11:44:38 PM
Recs: 0

I think these analyses are dead on. I am a buy and hold type, but my gamer son convinced me and my kids to make small wagers on TTWO. We are holding out for $18; figure Carl is betting on something.

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