Margate Capital Management: Samantha Greenberg’s Bullish Thesis on Take-Two Interactive (TTWO)

One of the things that made Margate Capital Management even more bullish on gaming is the fact that its “business model is undergoing a transformation to a recurring model that creates significant value”. The change she talked about at the conference is happening thanks to the growing online presence of gaming, which compels gamers to buy extra content for their online, participate in tournaments, stream game play, and more. In that manner, “the initial purchase of the game [is] just the beginning of the game’s monetization”.

Furthermore, video games are cheaper than similar forms of entertainment such as movies and sporting events and e-sports are becoming more popular each day. Ms. Greenberg thinks that in the near future, video gamers won’t even have to buy consoles, that there will be live streaming platforms for video games similar to Netflix, which will have so much addictive content that users will happily fork out monthly subscriptions for. To make the gaming world even more interesting, many colleges now offer video game scholarships.

While that explains Ms. Greenberg’s enthusiasm for the sector, she further revealed why Take-Two Interactive Software, Inc. (TTWO) was her fund’s number one stock pick. Some reasons for that include the stock’s price, as it was trading at a discount relative to its peer group, the company’s “best in class content creation”, and the fact that it holds “the highest average game score” and “the biggest upside”. She is confident in the success of the company’s upcoming games such as “Red Dead Redemption 2” and believes that Take-Two Interactive Software Inc. (TTWO) is also “a logical takeover target”.

Ms. Greenberg has estimated a base case price target for Take-Two Interactive Software, Inc. (TTWO) of $176, representing 42% upside from its current price, while her upside surprise target stands at $202, or 62% greater than the current share price. The worst-case scenario in her opinion would be a price target of $100 per share, representing a 20% drop.

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