According to Goldman Sachs analyst, Take-Two Interactive Software Inc. is poised to earn $2 billion because of sales of its next installment of Grand Theft Auto.
A hack last month involving data from GTA seeded Eric Sheridan's estimate to upgrade Take-Two's TTWO, stock to a buy from neutral, and boosted his price target to $165 from $131 Thursday, according to Goldman Sachs analyst Eric Sheridan. Sheridan stated that the series has sold almost 375 million units, up from 127 million in 2013 when GTA 5 was released, with the series bringing in about $7.7 billion in revenue since then.
Sheridan said unit sales and the estimated budget are two key variables in projecting the profitability of GTA 6, and the hack provided some clues about them.
In-depth: Grand Theft Auto 5 has made more money than any other single media title in history.
Sheridan sees earnings from GTA 6 coming in at more than $10 a share, which would imply more than 1.7 billion based on Take-Two's current shares outstanding.
The implied EPS is $10.44 $0.40 more than our base case Sheridan said, assuming the budget is $500 mm nearly 2 x GTA V budget, but maintaining 170 mm unit sell-through. The implied EPS is $11.75 nearly $1.70 more than the base case of $10.04 demonstrating significant leverage with each unit sold, assuming the unit sell-through is 245 mm units but at the same $2 bn budget. With an expected $70 list price and microtransactions from the online game, Sheridan expects to make $327 million annual operating profit from unit sales and about $372 million of operating profit from microtransactions, or about $699 million based on about 170 million units over nine years, about $125 in annual player transactions, and about $2 billion estimated budget.
See also: Severity of GTA hack depends on whether source code was taken, analysts say.
The last fiscal year, Take-Two reported adjusted earnings of $5.06 a share of revenue of $3.5 billion, and in August the company trimmed its outlook to provide for the integration of Zynga. Sheridan s figures take into account about $1 billion from Take-Two's recently closed acquisition of Zynga by fiscal 2025, which takes into account the figures.
Shares of Take-Two went up nearly 3% Thursday, while the iShares Expanded Tech-Software Sector ETF IGV was up 0.2% and the S&P 500 index SPX was down 0.5%. Take-Two shares are down 32% for the year on par with the IGV ETF, and a 21% drop in the S&P 500.
Of the 27 analysts who cover Take-Two, 21 have buy-grade ratings and six hold ratings, along with an average price target of $164.75.