Well first off I would say we are roughly $65 bucks off the ATH going into the biggest game release ever, seems like a pretty decent setup.
Fundamentally, it is pretty clear that the company will
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<p>Well first off I would say we are roughly $65 bucks off the ATH going into the biggest game release ever, seems like a pretty decent setup. </p>
<p>Fundamentally, it is pretty clear that the company will be hitting new levels of profitability. One can pencil in game unit sales #s, less the platform fees & Euro VAT charges, I'm pretty confident given the pent up demand that GTA 6 will sell more than GTA 5 (35m units). The obvious push-back is console availability, what consoles it will be on? will there be a console refresh in late '24? PC? GTA 6 App? GTA 6 Online version? etc etc... Given the huge anticipation of the game release, I think it is highly probable that Sony & Microsoft will be working in tandem to try and time a refresh prior to the GTA 6 release (maybe 4-8 months pre). I would say the range from consensus is roughly 40-60m units in the first 12 months post launch, likely 20-30m units in the first weeks/month. A good proxy might be Call of Duty Modern Warfare 2, which was estimated to sell ~20-25m units the first quarter of launch. <a href="https://investor.activision.com/news-releases/news-release-details/modern-warfare-ii-crosses-1-billion-sell-through-10-days-fastest">COD MW2</a> had over $1B in sell through in the first 10 days, quite a feat for a title that has had 19 installments over the course of the Call of Duty life. Juxtapose this w/ GTA 6, I think the pent up demand vastly outweighs COD MW2, also I expect the RCS in GTA 6 to monetize significant higher than a COD type game. </p>
<p>Regarding Zelnick and the most recent quarter, I think he was definitely sandbagging the guidance for the year, which in turn dials down the out year estimates. Estimates have come down steadily ever since the extremely bearish topline guide for FY '25. Prior to this some EPS estimates for FY '26 were $10+, and some closer to $11... I think if one believes they can get some cost synergies w/ Zynga (still ongoing; don't need 150 ppl working on a Star Wars App game imho), and they hit the higher end of unit volumes, say 45-60m units I think one could be looking at low teens EPS. Zelnick has had a history of doing these sandbags to guide the quarterly beat and raise cadence. If they can get to a low teens EPS, typically into these cycles they've gotten the multiple expansion, so I don't think it would be uncharacteristic to see a 20-25 multiple on low DD EPS. I also think these is a "blue-sky" scenario where the gamers/Reddit/WSB crowd start buying the stock, I'm obviously not banking on those animal spirits, but I could envision a scenario where this starts looking like an SMCI or an AI name.</p>
<p>Finally, I'll also say this, I think a lot of folks are just jockeying to try and time the entry into the release date and trade this stock. To be clear I think TTWO has a multi-year runway post GTA 6 release, and lets not forget Red Dead Redemption 3, the last release date was in 2018, it is due for a refresh and there are rumors RD3 could be released in calendar 2026-2028. The last time GTA 5 and RD2 went through a release cycle and you bought about 1 year prior to the GTA 5 release in 2012, and held until the RD2 release the stock went up about 20x, or ~ 60% ann. I'm not saying this will be a 20x from here in 6-7 years, but I do think this has multi-bagger potential from these levels.</p>
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