The shares of this video game maker were just initiated at Wells Fargo with an ‘Overweight’ rating.
Take-Two Interactive Software, Inc. (TTWO)
From Forecasts & Strategies
It’s time to add another winner to our holdings, this time in a stay-at-home entertainment stock that was performing beautifully even before the world began to cocoon.
That stock is video game maker Take-Two Interactive Software.
Now, we aren’t really the video game types. I mean, let’s face it, we don’t fit the demographic here for playing games such as NBA 2K and Grand Theft Auto, the two biggest franchises for TTWO.
Yet what is in our demographic is making money. And on that front, TTWO is an earnings powerhouse. The company’s most recent quarter saw a 131% year-over-year spike in earnings per share (EPS). Over the past three quarters, average EPS growth is a robust 94%. Look for these metrics to continue to impress, as demand for video games is going to soar due to the stay-at-home wave caused by the coronavirus.
The company also stands to benefit even more than usual due to its digitally delivered at-home entertainment. TTWO makes more profit when its games are digitally downloaded than they do when a game is purchased inside a physical store (and we know those stores are closed right now).
As for share price, TTWO is in the top 14% of all publicly-traded stocks in terms of relative price strength over the past year with a gain of 23.2%. Yet more impressive of late is the company’s 6% spike in just the past few trading sessions. That tells us that the fast money is moving back into TTWO.
Technically speaking, today shares just broke back above the 50-day moving average of $116.43, and the next key technical level to break is the 200-day moving average at $121.09. We suspect this level will be easily broken in short order, as the current social distancing/stay-at-home trend is likely to continue at least through April.
So, let’s buy Take-Two Interactive Software at market, with a protective stop at $93.65.
For those who want to take a bigger bet, buy the TTWO June $120.00 call options (TTWO200619C00120000) at market. They last traded for $9.40 and expire on June 19.
Mark Skousen, Forecasts & Strategies, markskousen.com, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, March 30, 2020