Addiction in Take Two's Position

Renia is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Beware: Take Two Interactive (NASDAQ: TTWO) can be as addictive as the video games that it sells. Not a few Wall Street watchers must have been glued to the TTWO ticker as the price of this New York-based company has almost doubled from their 52-week low on the NYSE. How this darling of PC gamers achieved this feat can be gleaned from the results of its third quarter fiscal 2013 released earlier in February.

TTWO’s growth and profits for the quarter exceeded most expectations, even the company’s. During the period GAAP net revenue soared to $415.8 million from the $236.3 million posted in its fiscal 2012 third quarter. Non-GAAP net revenue rose to $405.0 million from $236.3 million of the year-ago period. GAAP net profit from continuing operations amounted to $70.9 million, or $0.66 per diluted share, a robust improvement compared to the $14.2 million, or $0.16 per diluted share, registered for the year-earlier period.

Appreciable non-GAAP net income increased to $78.8 million, or $0.67 per diluted share, from the $29.0 million, or $0.27 per diluted share, recorded a year earlier. As of Dec. 31, 2012, the company’s coffers brim with $448.7 million in cash and cash equivalents.

Bagging the Market’s Holiday Mood

One of the drivers of these rosy results was TTWO’s record-breaking launch of NBA 2K13, the latest installment in the company’s top-rated and best-selling basketball franchise, which has already sold 4.5 million copies. Demand likewise continues to be strong for its Borderlands 2, sales of which have already hit the 6 million mark. The surprisingly warm market acceptance of the turn-based strategy game XCOM: Enemy Unknown and strong holiday sales also contributed to TTWO’s outstanding fiscal 2013 third quarter results.  

In stark contrast, Zynga (NASDAQ: ZNGA), the San Francisco-based maker of such games as Farmville, popularized on Facebook (NASDAQ: FB), struggled through a challenging holiday quarter, usually one of the most robust seasons for companies of its ilk. As a result of the dismal holidays for Zynga, its shares have now sunk to around $2.60 from its $15.91 peak and the $10 price tag it had when the company went public on Dec. 16, 2011.

To its credit, Zynga appears on the right track toward a turnaround. Besides cutting manpower and closing studios, it is has also phased out older games that have lost much of their following. All told, there were some thirteen Zynga games that had been sent to the dustbins. Complementary to this move, the company is now encouraging gamers to try its newer titles and is developing new game platforms. 

Already on Zynga’s drawing boards this year is a set of actual money casino games that the company is developing with Party Digital Entertainment. This suite of games, which include blackjacks, roulette, poker, and slots, is expected to be released by the first semester of 2013. The company also plans to branch out this year into licensed board games and launch more game apps for mobile communication devices, launches that are said to be drawing market interest.

A Resounding Echo in Facebook

Meanwhile Facebook is also exploring possibilities on how it can cash in on users from among its estimated 1 billion members who are increasingly accessing the social networking site via mobile communication devices, such as tablets and smartphones. The growth in traffic to the site via these mobile devices presents yet another potential to grow the social network’s bottom line, or so the rationale goes.

Facebook stands to gain greater monetization possibilities from this trend of mobile users as the company claims that these fans are more loyal to the social network site. Facebook VP Dan Rose said in a recent media conference that some 70 percent of Facebook mobile users access the site daily. This compares with less than 50 percent of those who just use their PC for site visits.

What Facebook now wants to do is provide more app space for these mobile users, features that can draw more revenue from online marketers and advertisers. Unlike PC game-centered Take Two and Zynga, though, the social network’s focus would be more diversified, involving movies, books, and fitness goals that its members share information about through the site.

A $448.7-million Apple for Investors

On the other hand, don’t expect Zynga to level up to match Take Two Interactive's performance anytime soon. Significantly, consumer anticipation is mounting for the forthcoming launches of Take Two Interactive’s Grand Theft Auto V and BioShock Infinite. These twin offerings mean that Take Two is  positioned for a solid conclusion to its fiscal year 2013. They are also strong platforms for substantial sales and profits growth in the coming fiscal year.

Moreover, the company, which has $448.7 million in cash surplus, has also announced that its board of directors has authorized the repurchase of up to 7.5 million shares of the company’s common stock. The purchases, which will be done from time to time through several methods including the open market, will certainly be worth keeping an avid watch on as they could further boost the average value of the company’s stock.


ReniaBula has no position in any stocks mentioned. The Motley Fool recommends Facebook and Take-Two Interactive . The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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