Is Take-Two Interactive Stock A Buy After Its Fall Following The Zynga Acquisition Announcement?


[Updated: Jan 11, 2022] TTWO Stock Decline

The stock of Take-Two Interactive (NASDAQ: TTWO) has seen a fall of 14% over the last month, while it is down 20% over the last week. TTWO stock rose from levels of around $160 in early December 2021 to levels of $182 earlier this month, before falling to levels of $143 currently. This fall can be attributed to its announcement of the Zynga acquisition in a $12.6 billion deal, valuing Zynga at $9.86 per share, reflecting a large 64% premium to Zynga’s last week share price of $6. Although the 64% figure may appear to be high, it should be noted that Zynga stock was being weighed down over the recent months, owing to declining user engagement levels and changes to Apple’s ad tracking policy.

Despite the 64% premium, the $9.86 figure is still 20% lower than Zynga’s 52-week high of $12.32. We believe that the deal is positive for Take-Two Interactive, giving its franchises better reach in mobile gaming. On the financial front, Take-Two expects $100 million in cost-saving synergies in the first two years and around $500 million of incremental annual Net Bookings over the coming years. Zynga, over the recent years, has made multiple acquisitions and improved its revenue growth, a trend which is expected to continue going forward, as well. As such, investors can use the current dip in TTWO stock as a buying opportunity for strong returns over the long term.

That said, what about the near term? Given that TTWO stock is down a good 14% in a month, will it continue its downward trajectory, or is a rebound imminent? Going by historical performance, there is a slightly higher chance of a fall in TTWO stock over the next monthOut of 81 instances in the last ten years that TTWO stock saw a twenty-one day fall of 14% or more, only 38 of them resulted in TTWO stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 38 out of 81, or about 47% chance of a rise in TTWO stock over the coming month, implying that TTWO stock may see lower levels in the near term. See our analysis on Take-Two Interactive Stock Chance of A Rise for more details.

So, if this follows historical patterns, TTWO stock may see lower levels in the near term. However, we still believe that the current levels are attractive and investors are likely to be better off buying the current dip in TTWO stock. It is also helpful to see how its peers stack up. Check out Take-Two Interactive Stock Comparison With Peers to see how TTWO stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

Take-Two Interactive (TTWO) Stock Return (Recent) Comparison With Peers

  • Five-Day Return: ZNGA highest at 29.1%; TTWO lowest at -19.9%
  • Ten-Day Return: ZNGA highest at 31.5%; TTWO lowest at -20.4%
  • Twenty-One Days Return: ZNGA highest at 33.1%; TTWO lowest at -14.1%

Below you’ll find our previous coverage of TTWO stock where you can track our view over time.

 

[Updated: Sep 23, 2021] TTWO Stock Update

Last month, we discussed that Take-Two Interactive (NASDAQ: TTWO) stock price could rebound over a one-month period after falling 5% in a week, based on its historical performance. However, TTWO stock has seen a decline of over 8% since then, and it is down 5% in the last five trading days. The recent decline can be attributed to rising concerns over the delay of four months in release of the Grand Theft Auto game, meaning that the release will be out of the holiday season.

More importantly, so far the user engagement levels for gaming, at large, are higher than what they used to be before the pandemic, and it is likely that the engagement levels will fall with rising vaccination rates and opening up of economies. As such, gaming publishers may be better off releasing the games closer to the holiday season rather than later. This has resulted in some pessimism around TTWO stock over the recent weeks.

As we discussed in our previous update, according to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for TTWO stock average around 3.6% in the next one-month (twenty-one trading days) period after experiencing a 5% drop over the previous week (five trading days) with a reasonable 62% probability of a positive return over this period. Our dashboard on Take-Two Interactive stock price forecast offers more details.

So, if this follows historical performance, it is likely that TTWO stock will see a rebound going forward. But if you are considering TTWO stock as an investment option over a larger time frame, you can explore our forecast for Take-Two Interactive valuation.

 

[Updated: Aug 4, 2021] TTWO Stock Decline

The stock price of Take-Two Interactive (NASDAQ: TTWO) has seen a 5% fall over the last five trading days, while it was down 8% yesterday (Aug 3). The company reported upbeat FYQ1 2022 results, with revenue of $711 million and adjusted earnings of $1.01 per share, well above the consensus estimates of $686 million in revenue and $0.87 earnings per share. While the total revenue was down 29%, earnings plummeted 56% on a y-o-y basis. Note that FYQ1 2021 saw massive growth in demand for Take Two’s games with the spread of the pandemic, as people were confined to their homes, eschewing other public forms of entertainment.

Despite an upbeat performance, TTWO stock plunged 8% due to its outlook for the next quarter and the full-year falling below the street estimates. The company’s guidance of $3.2 billion revenue and $3.87 in earnings at mid-point of the range, is well below the consensus estimates of $3.4 billion in sales and $4.80 in earnings per share. Now, as the economies open up with a rise in vaccination rate, people have started to venture out of their homes, and this to some extent will impact the overall user-engagement levels for gaming. That said, it is expected to be higher than the pre-pandemic levels, boding well for gaming companies at large. But the revised outlook from Take Two surely didn’t bode well with the investors.

Now, after a 5% fall in a week, will TTWO stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for TTWO stock average 4.1% in the next one-month (twenty-one trading days) period after experiencing an 4.6% drop over the previous week (five trading days), implying that TTWO stock may rebound in the near term.

But how would these numbers change if you are interested in holding TTWO stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Take-Two Interactive stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

Furthermore, despite the fact that Take-Two has revised its full-year outlook lower, its stock is trading at a multiple lower than levels seen over the recent years. Our dashboard – Factors That Drove Take-Two Interactive’ s Stock Price Change – has more details.

MACHINE LEARNING ENGINE – try it yourself:

IF TTWO stock moved by -5% over five trading days, THEN over the next twenty-one trading days TTWO stock moves an average of 4.1%, with a reasonable 63% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Take-Two Interactive Software Stock Movements:

Question 1: Is the average return for Take-Two Interactive Software stock higher after a drop?

Answer: Consider two situations,

Case 1: Take-Two Interactive Software stock drops by -5% or more in a week

Case 2: Take-Two Interactive Software stock rises by 5% or more in a week

Is the average return for Take-Two Interactive Software stock higher over the subsequent month after Case 1 or Case 2?

TTWO stock fares better after Case 1, with an average return of 4.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.2% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Take-Two Interactive Software stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Take-Two Interactive Software stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For TTWO stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Take-Two Interactive Software after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Take-Two Interactive Software stock by changing the inputs in the charts above.

While TTWO stock may rise in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Tyler Technologies vs. Take-Two Interactive.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Jan 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TTWO Return -17% -17% 198%
 S&P 500 Return -1% -1% 110%
 Trefis MS Portfolio Return -5% -5% 273%

[1] Month-to-date and year-to-date as of 1/11/2022
[2] Cumulative total returns since the end of 2016

Trefis
Market Beating Portfolios
Trefis 
Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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