Leon Neal/Getty Images News
Take-Two Interactive’s (NASDAQ:TTWO) trailer for Grand Theft Auto VI this week broke records for the most viewed YouTube video in the first 24 hours, with 122 million views so far, already surpassing the 2011 GTA V trailer.
I’ve owned TTWO for about 10 years and wrote bullishly about it in 2017, when the stock was at $58. This was a few months prior to the introduction of the Western-themed Red Dead Redemption 2. Since then, RDR2 has proven to be a hit and attention has turned to the GTA VI release, now scheduled for 2025. This offers a similar setup to that of 2017, albeit on a larger scale because the armed robbery game has been a much higher-selling title.
The trailer from TTWO subsidiary Rockstar Games introduced Lucia, a Latina career criminal and GTA’s first female driver in several iterations. She is drawing excellent reviews. While a commenter on the SA report suggested that the game would be burdened by “political correctness,” Lucia seems to be designed for the non-PC reason that she’s a charming knockout along the lines of Eva Mendes. Her male partner, who leakers say is named Jason, is kind of a Ryan Gosling type.
The public has been fascinated by a young couple who drive around committing armed robberies. Bonnie Parker and Clyde Barrow have been the subject of 10 movies and are still famous 89 years after they were gunned down. Lucia and Jason fit the bill with a “Bonnie and Clyde dynamic.” Players will try to make sure their story doesn’t end the same way.
A YouTube reviewer found the graphics incredible, particularly how sunlight plays on strands of hair, and noted many car customization options that will rake in the money. A side-by-side graphics comparison showed the improvement in realism over GTA V.
Timing Of Launch
There was a negative surprise, though, as the company revealed “COMING 2025,” meaning it won’t be ready for next year’s holiday season. TTWO’s fiscal projections suggest a launch for Xbox Series X and Sony PlayStation 5 before the 2025 fiscal year ends on March 31, but the vagueness of the 2025 date gives room for slippage until holiday season, nearly two years from now. In the case of RDR2, the PC version followed the console version 12 months later, but GTA VI contains so many detailed animations that it could take longer.
Fiscal 2025 bookings projections were reduced slightly from in excess of $8 billion to slightly under that. The stock dropped 5% in premarket trading Tuesday, but quickly recovered due to the trailer’s overwhelming popularity and a favorable reception. It dropped again on a Bank of America report Thursday predicting the release would be delayed until the end of 2025, but stabilized.
Morgan Stanley projected adjusted earnings to more than double from $3.15 in the current fiscal year to $8 in 2025 and more in 2026, with higher-than-base-case incremental sales driving outsized profit upside.
How Stock Behaves Into Releases
The release of GTA V a decade ago is instructive. The release had been anticipated for 2012, and when it got delayed, the stock (TTWO) fell from the $16 range to around $8. After that, it rose steadily, peaking at $19 a month before the actual introduction in September 2013. The stock backed off to $16 by November before beginning a long rise due to strong sales.
I’ve owned TTWO for about 10 years and wrote bullishly about it in 2017, anticipating the introduction of the Western-themed Red Dead Redemption 2 later that year. Again, the intro was delayed, this time until October 2018. During that period, the stock rose and reached $136 shortly before introduction. It then backed off and had another peak during the COVID-19 lockdown year of 2020. It was weak for the next two years as the results lacked a significant catalyst and the quarantine boom in gaming faded, and despite the recent rise, is about 25% off its peak.
Sources of Risk
The major risk is delays, the same as it was with the GTA V and RDR2 releases. In both those cases there were selloffs when announced shipping dates slipped. If for any reason Rockstar is unable to produce the game in 2025, investors could expect a sharp reject.
A secondary risk is that a capital raise is needed to confront heavy pre-launch expenses, for example, a push to hire highly paid animators to confront the deadline. This would either add to the debt load or provoke an equity dilution.
A third risk is problems with other parts of the company, such as a lower forecast for net bookings at mobile game maker Zynga, which was acquired in 2022. Management discussed this, and did not view it as major, in the most recent earnings call.
There’s also the risk that the game will stumble to be one of the biggest sellers in the history of gaming. However, I don’t see that as likely. GTA V is second in total unit sales with 190 million, behind only Mojang’s Minecraft with 300 million and much higher than any previous GTA release. The franchise’s audience has skewed more heavily male than gaming in general, but GTA VI’s improved graphics and Bonnie and Clyde vibe should appeal to both sexes, so it seems admire a good bet to top that figure eventually.
At some point, all this optimism will be priced in. My investigate of hot product introductions indicates that’s not likely to happen until just before the release, whenever it comes. In the meantime, I’ll be looking for dips to enhance my position.
