Take-Two smashes earnings estimates and criticises Trump
Video game giant Take-Two Interactive, the company behind smash hit franchises like Grand Theft Auto and Red Dead Redemption, reported earnings this week that blew analysts’ expectations out of the water. Understandably, Take-Two’s share price rocketed skyward – but not before taking a brief dip. What was the cause of that dip? Comments from US President Donald Trump, who responded to two tragic mass shootings at the start of the week by announcing a crackdown on violent video games. Unsurprisingly, Take-Two CEO Strauss Zelnick had something to say about that.
Take-Two Interactive’s share price has appreciated by 19% year to date
Source: Yahoo Finance
Here are the relevant financial figures. On revenue (or “net bookings” as the company reports them) Take-Two reported $422 million. That’s a significant beat against analysts’ expectations for the first quarter of fiscal 2020, which came in at $357 million. On earnings, the company outperformed by an even greater margin, reporting non-GAAP per share earnings of 27c. Wall Street had expected a figure of just 4c. The company’s adjusted revenue guidance for next quarter also came in above expectations. Take-Two forecasts revenues between $860 million and $910 million for the September quarter – consensus estimates were for guidance of $852 million.
These strong financials were a direct result of strength across all the company’s core franchises – particularly a surprise year-on-year increase in revenue from Grand Theft Auto Online, which no one (neither Take-Two nor the Street) had expected to see.
In the press release, Zelnick praised Take-Two’s performance, saying: “Fiscal 2020 is off to a terrific start with first quarter operating results that beat our expectations.” But he was less positive in a separate interview at the start of the week, when he was asked about President Trump’s decision to crack down on violent video games in response to real-life gun violence. He said:
“We’re just sickened and saddened by these senseless tragedies. That said, blaming entertainment is irresponsible. Moreover, it is highly disrespectful to the victims and their families. The fact is entertainment is consumed world-wide...but gun violence is uniquely American. So we need to address the real issues.”
Evidently, banning imaginary guns as a response to real-world shooting doesn’t cut it as a solution for Zelnick and the team at Take-Two.
Dominion holds Take-Two Interactive in its Global Trends Ecommerce Fund.
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