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Take-Two Interactive Software, Inc. (TTWO), Microsoft Corporation (MSFT) & 2014: A Very Good Year?

A producer of some of the most popular video games on the market, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has more than doubled since reaching its 52-week low of $7.37 last summer. Although the overall video game industry has been on a decline lately, with new hardware due from the major console manufacturers, plus several huge new games set to be released this year, I figure that this software developer is worth a look before it releases earnings next week.

Who is Take-Two Interactive?

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) publishes, develops, and distributes games and accessories for PC’s and the major game systems, such as PlayStation 3 and Xbox 360. The company publishes their games through their wholly-owned subsidiaries, Rockstar Games and 2K. Rockstar games publishes the very famous Grand Theft Auto and Midnight Club franchises, and 2K publishes a variety of titles including the very popular 2K Sports games. As the success of new games is extremely unpredictable, Take-Two Interactive Software, Inc. (NASDAQ:TTWO)’s revenue has been fairly erratic over the years, as seen in this 10-year revenue chart:


Take-Two has partnerships with virtually every big player in the video gaming space, including Sony Corporation (ADR) (NYSE:SNE), Microsoft Corporation (NASDAQ:MSFT), Nintendo, and even Apple Inc. (NASDAQ:AAPL) to produce iPhone and iPod games.

Sony and Microsoft are the two leaders in the console space, with Sony’s PlayStation 3 and Microsoft’s Xbox 360. Sony and Microsoft Corporation (NASDAQ:MSFT) both grant Take-Two Interactive Software, Inc. (NASDAQ:TTWO) rights to develop, market, publish, and distribute titles for their respective consoles, both of which are due for a refresh this year (see below).

2014: A very good year?

There are several positive catalysts in the upcoming 2014 fiscal year (which began in April), including new games for existing consoles, as well as games being developed for new consoles. The biggest event for Take-Two Interactive Software, Inc. (NASDAQ:TTWO) this year is the expected release of the highly anticipated Grand Theft Auto V game, which is set to be released on both PlayStation 3 and Xbox 360 on Sept. 17 this year.

Analysts are projecting revenue of almost $1.8 billion in FY14 for the company, which would be their highest ever, and the new Grand Theft Auto game is expected to contribute about half of that.

While I believe that the pending success of the GTA game has been factored into the share price already, I don’t think the possibilities that come with the new hardware have been fully priced in just yet. Sony Corporation (ADR) (NYSE:SNE) is set to release their PlayStation 4 during the fourth quarter of this year, in time for the holiday shopping season.

As the latest information indicates that the console will notbe backward-compatible, this creates a tremendous opportunity for companies like Take-Two Interactive Software, Inc. (NASDAQ:TTWO) to re-issue their existing lines of games in the new format. I don’t know about all of you, but I bought some of the albums I owned on cassette again when they were re-issued on CD’s in the ‘90’s, because the listening experience was so greatly improved. The same scenario could be the case here.

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