Novice Investing - Another Take for Take Two

Date: Monday 01st 2008f December 2008 04:43:22 PM

Another Take for Take Two - 12/12/2006

By: Novice Investing Staff

Has anyone looked at Take Two Interactive (TTWO) lately? Last, we talked about the company when it was hit with subpoena from New York District Attorney. At the time, bad news seemed to befall the company each week. Furthermore, stock price was hovering close to $ 12 per share. The date was June 27th, 2006.

That was as close to the bottom as it can be. Today, Take Two is trading at $ 19.66 per share, a 64% return that any money managers would love to have on their portfolio. What has changed since then? Investors have waken up to the fact that Take Two will release a new Grand Theft Auto in 2007, which we believe won't be slapped an X rated game this time. How about the fact that PS3 and Nintendo Wii is released this holiday season? While investors knew this fact six months ago, there is some doubt on when the actual release date of these new consoles would be. A little manufacturing problem here and a little component problem there, will result in a console delay that enact gloom for holiday season 2006. Now, these does not seem to be the case.

Also, as we pointed out six months ago, Take Two had $ 100 Million in cash, which is neither good nor bad for the company of its size. Latest data shows this cash pile grow to $ 141 Million, mainly due to the reduction in Accounts Receivable and inventory. Going forward, Take Two needs to prove that it can consistently produce profit. Right now, potential profit booster is from its Civilization franchise and Grand Theft Auto. However, the latest release of Grand Theft Auto will contain no sex and violence which may not produce as much revenue as the previous version. In the long run, however, for each release of Grand Theft Auto will generally be revenue driver for Take Two. While we do not know how Grand Theft Auto will sell next year, 2007 should represent the bottom for that franchise.

At current price, investors seem to be too enthusiastic regarding Grand Theft Auto's prospect. That is great. When Take Two disappoints, share price will drop, which will provide decent price entry for long term investors. In the meantime, while current share price can provide investors with further appreciation, the low hanging fruit had already been picked.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Take Two Interactive Software Inc. (TTWO) or any other securities.

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