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Take-Two Rises as Wall Street Lauds Earnings Beat

Take-Two Interactive traded higher after the videogame publisher received positive reviews from a number of analysts.

Shares of Take-Two Interactive  (TTWO) - Get Report were higher Wednesday after the videogame publisher reported that pandemic-driven demand boosted earnings, prompting positive reviews from analysts at Morgan Stanley, Baird, Credit Suisse, Barclays and Jefferies.

Shares of the New York company at last check rose 5.6% to $177.14.

For the fiscal fourth quarter ended March 31, net income rose to $218.8 million, or $1.88 a share, from $122.7 million, or $1.07 a share, in the year-earlier quarter. The latest result exceeded the FactSet consensus analyst estimate of profit of 97 cents a share.

Revenue climbed 10% to $839.4 million, ahead of the FactSet analyst consensus of  $661.4 million.

Analysts at Morgan Stanley said the latest results showed Take-Two's "ability to drive gamer engagement and monetization across its game ecosystems."

"We continue to believe content investment and innovation is critical to attracting/retaining gamers and wallets as the world reopens ... and these results speak to TTWO's ability to continue to execute on its leading franchises," Morgan Stanley analysts wrote in a note.

Morgan Stanley, which has an overweight rating on the stock, said the company is well-positioned to continue to grow strongly, given "best in class content" and "a large, engaged, and relatively undermonetized player base."

The firm has a price target of $215 on the stock. The "robust pipeline and TTWO’s strong history of execution” will support the stock’s valuation," said Morgan Stanley.

Jefferies analysts affirmed a hold rating on the stock.

The results [were] solidly ahead of expectations as has become the norm for the group this quarter," the investment firm said.

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Take-Two Earnings Top Expectations on Strong Gaming Demand

However, the firm also said, "Counting all of TTWO's development studios and its known franchises likely being worked on, we struggle to reach the 23 titles from [fiscal 2022 to fiscal 2024] that TTWO expects to release, raising additional questions (and a lot of excitement) around the title slate."

Baird, which has an outperform rating on the stock, said, “While some investors may be disappointed to wait at least another year for [Grand Theft Auto VI], the game was not in [Wall] Street models for fiscal 2022, and we believe guidance sets a conservatively low bar for the fiscal year ahead. New title announcements could be catalysts in the months ahead."

Wells Fargo Securities noted that the stock has limited downside risk, as the outlook is conservative and “the opportunity for a major flop in 2021 is limited.” The firm rates TTWO overweight with a $235 price target.

Overall, this was a very solid quarter for the company," said Jim Cramer and the Action Alerts PLUS team, which holds Take-Two in its portfolio.

"Guidance wasn't as strong as expected, but we reiterate that this is a team known to be conservative, and coming out of the pandemic it makes more sense than ever to underpromise given the uncertainty relating to engagement and therefore in-game purchase activity as the world reopens," the AAP team added.

Analysts at Benchmark said Take-Two stock is trading at a compelling entry point for long-term growth investors. The investment firm has a buy rating and $250 target on Take-Two.

Credit Suisse increased its price target on Take-Two to $205 from $204 and affirmed a neutral rating on the stock. Credit Suisse analysts said they "recalibrated their release-slate assumptions" for Take-Two.

The company has guided to 21 total titles in fiscal 2022 and more than 40 in fiscal 2023/fiscal 2024, implying a new cadence of more than 20 titles a year.

Barclays analysts said, "We think there is significant upside to both the bookings and EPS guide." Barclays maintained its overweight rating and price target of $230.

Take-Two is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer adds or removes stocks from his portfolio? Learn more now.