TTWO Shares Surge as GTA VI Comes Out All Guns Blazing

Such
franchises
also
reflect
the
increasing
discretionary
spending
on
this
segment
of
the
entertainment
industry
by
younger
people.
Gaming
is
big
business
and
investors
are
taking
notice.
Back
in
November
1997,
when
GTA
originally
launched
as
a
birds-eye-viewer
single-player
adventure
game,
you
would
hardly
believe
commentators
if
they
told
you
that,
26
years
later,
its
sixth
iteration
would
be
a
topic
of
discussion
on Radio
4’s Today programme.

Many
hyped
cultural
events
can
be
found
to
have
an
investing
angle
if
you
look
hard
enough
–
Squid
Game
boosted
Netflix’s
profile
for
example
–
and
gaming
is
no
exception.
The
GTA
series
is
developed
by
Rockstar
Games,
a
New
York-based
video
game
publisher
that
can
trace
its
roots
back
to
Scotland
in
the
1990s.
And
Rockstar’s
parent
company
is
Take-Two
Interactive
[TTWO],
a
$26
billion
(£20.6
billion)
venture
that
owns
a
number
of
franchises
including
Red
Dead
Redemption
and
BioShock.

What
do
Morningstar
analysts
say
about
Take-Two?
Firstly,
that,
despite
a
50%
rise
in
its
share
price
this
year,
lifted
by
the
GTA
VI
buzz,
shares
are
still
around
$10
below
their
fair
value
of
$165.
Still,
shares
trade
on
a
steep
price/earnings
multiple
of
over
72.

Clearly
the
smart
money
would
have
bought
into
this
venture
at
the
start
of
the
franchise
but
life
is
rarely
that
easy
for
investors.
There
was
a
moral
pushback
against
some
of
the
game’s
more
notorious
content,
such
as
driveby
shootings
and,
shall
we
say,
adult

interactions,
but
that
was
a
sign
that
the
“brand”
was
gaining
cultural
traction.

Take-Two
Interactive’s
share
price
is
up
nearly
4,000%
since
then,
but
is
it
still
attractive
now?

I
Won’t
Buy
The
Game,
Should
I
Buy
The
Stock?

Take-Two’s
second
quarter
results
in
November
were
in
line
with
forecasts,
our
analyst
Michael
Hodel
says,
but
the
company’s
management
dialled
back
expectations
for
the
2025
financial
year,
the
period
which
could
see
GTA
VI
hit
the
market.

Hodel
addresses
this
in
the
latest
note:
“we
suspect
the
game
is
still
slated
to
launch
soon,
but
maybe
a
bit
later
than
Take-Two
previously
expected.
Regardless
of
exactly
when
GTA
6
is
released,
we
expect
the
title
will
generate
significant
value
for
Take-Two
shareholders.”

More
than
345
million
units
of
GTA
have
been
sold
over
its
lifetime
but
gaming
has
changed
since
its
inception.
Once
a
one-off
purchase
of
a
disk,
franchise
games
are
often
bought
and
played
online
with
interactive
elements
and
“add
ons”.
Morningstar’s
Hodel
notes
Take-Two
fully
embrace
this
model
and
it’s
part
of
the
firm’s
narrow
economic
moat.

“Like
its
peers,
the
firm
is
focused
on
engaging
users
beyond
the
initial
game
sale
by
expanding
the
use
of
multiplayer
options
and
releasing
downloadable
content,
or
DLC.
Online
game
modes
lead
users
to
develop
social
networks,
thus
encouraging
player
loyalty.”

He
adds
Take-Two
introduced
GTA
Online
in
2013
with
the
last
iteration
of
the
title,
“expanding
its
life
cycle
and
monetisation”.

GTA:
Many
Ways
to
Play

I
last
wrote
about
computer
games
as

a
consumer
trend
in
the
pandemic
era.
Of
course
gaming’s
lucrative
run
began
long
before
then,
as
my
2019
article


How
to
Tap
Into
the
Computer
Game
Boom reveals.

Fortunately
for
investors,
there
are
many
ways
into
this
huge
consumer
story,
via
consoles
made
by
Sony,
Nintendo
and
Microsoft.

Or
you
could
watch
the
M&A
activity:
China’s
Tencent
bought
a
40%
stake
in
Epic
Games
in
2012,
the
US
private
company
that
developed
Fortnite,
which
has
gripped
gamers
worldwide
(and
troubled
parents
and
teachers
in
the
process).

An
October
2018
funding
round
valued
Epic
at
$14
billion
but
Pitchbook
now
sees
that
above
$30
billion
after
an
April
2022
round.
Chinese
tech
firms
have
had
a
rough
ride
recently,
but
they
are
heavily
invested
in
gaming,
a
hobby
that
attracts
so
much
screen
time
there
that
the
government
intervened
a
few
years
ago.

And
there
are
established
“pure-play”
US
firms
like
software
developers
Electronic
Arts
[EA] and
Activision
Blizzard
(soon
to
be
part
of
Microsoft),
which
own
franchises
like
Fifa
and
Call
of
Duty.
France’s
Ubisoft,
home
of

Assassin’s
Creed,
flies
the
flag
for
EU
gaming
too.

Even
non-gaming
companies
are
wanting
a
piece
of
the
action;
Netflix
is
making
previous
GTA
games
available
this
month
and
Apple
has
launched
an
Arcade
subscription,
so
expect
more
of
this
sort
of
collaboration
from
cash-rich
tech
firms
in
the
coming
years.
It’s
not
all
a
one-way
bet
though;
it
was
“Game
Over”
(or
“WASTED”,
as
GTA
fans
have
come
to
expect) for
Google’s

Stadia
streaming
service
earlier
this
year
after
a
near-four
year
run.

Haven’t
hype-following
investors
now
moved
on
to
artificial
intelligence
(AI)?
Yes,
but
there
are
crossovers
everywhere:
2023’s
market
outlier
Nvidia
makes
computer
chips,
and
AI
has
driven
many
of
the
innovations
within
the
gaming
industry.
You
could
say
games
are
also
a
play
on
AI
too.

If
this
latest
iteration
of
GTA
isn’t
entirely
AI-driven
don’t
be
surprised;
you
may
well
find
AI
is,
at
the
very
least,
the
butt
of
just
a
few
jokes.
After
all,
GTA
isn’t
just
a
violent
video
game.
It’s
an
interactive
satire
on
modern
life.
We
can
only
wonder
what
Morningstar
analysts
would
say
about
GTA
V’s
Lifeinvader
app!

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