Last week, Take-Two Interactive Software, Inc. (NASDAQ: TTWO) raised its fiscal year adjusted sales forecast after beating quarterly estimates on demand for its wildly popular videogame franchises “Grand Theft Auto” and “NBA 2K” coming from people stuck at home due to coronavirus lockdowns.
Take Two’s sales soared 54% from March to June – a 1st fiscal quarter record.
That sent shares up about 7% in after-market trading. Now the stock is up 43% on the year. And I think it could reasonably go much higher over the next 12 months…
You see, U.S. spending on video games jumped 26% in June to $1.2 billion. That’s the highest month-over-month increase in over a decade.
This is happening because people are turning to games for relaxation during the lockdowns. They’re saving money by not going out to restaurants, the movies, sporting events, etc.
So, they have extra money to spend on new video games and more in-game content…
In fact, the spending surge from microtransactions in “NBA 2K” jumped 126% – another new record.
And “Grand Theft Auto V” was the fourth best-selling game in June. Over 135 million units of the game have been sold since its launch in 2013.
Another thing I like about Take-Two is that they’re finally raising the price for new video games – specifically the ones they’re creating for the new PlayStation 5 and Xbox Series X – to $69.99.
That’s a $10 increase from current-generation console prices, which have been stuck at $59.99 for over a decade.
This modest price increase shouldn’t stop consumers from purchasing new games and will compensate the company for added production costs associated with building games for the new consoles set to be released later this fall.
Take-Two also lifted its adjusted revenue forecast for its fiscal year ending March 2021 to a range of $2.80 billion to $2.90 billion. That’s up from an earlier estimate of $2.55 billion to $2.65 billion. It’s also up from consensus analyst estimates of $2.75 billion.
On an adjusted basis, the game publisher reported first-quarter revenue of $996.2 million, beating estimates of $843.7 million.
With an earnings beat like that, the stock could rather easily increase another 50-100% (or more) from current levels by this time next year.
But Take-Two’s not the only one having success with video game sales.
It's all connected in the gaming industry. The 26% record U.S. increase in video game spending in June lifted the tide for all gaming companies – both on the hardware and software side.
Microsoft Corp’s (NASDAQ: MSFT) gaming sales soared 64% thanks to Xbox games and subscriptions.
Now, the company is working on integrating Xbox with its upcoming “Netflix for games” service, which lets you play from your smartphone or tablet.
Launching September 15, Microsoft’s cloud gaming division will allow players to choose from a selection of over 100 games including, “Destiny 2,” “Gears of War 5,” and “Halo 5.”
The ability to play games from the cloud is a concept that’s gathered increased momentum in the $150 billion gaming industry – especially after Google invested billions to launch “Google Stadia” last year.
And finally, Sony Corp’s (NYSE: SNE) gaming sales surged 33% – also helping it crush its most recent earnings report.
Sony's PlayStation Plus subscription service added a best-recorded 3.4M users.
And just like Microsoft, Sony is also gearing up to launch its next generation PlayStation console (the PS5) just in time for the holidays.