Take-Two shares jump after 1st-quarter results, outlook surpass expectations

Take-Two shares boosted by 1Q results, outlook

NEW YORK — Shares of Take-Two Interactive Inc. got a boost Thursday after the video game publisher posted first-quarter results and a profit forecast for the current period that surpassed Wall Street’s expectations.

Take-Two, best known for the “Grand Theft Auto” franchise, said sales of “NBA 2K10″ and “Borderlands,” along with older “Grand Theft Auto” games, drove the quarter’s results. Digital sales were also strong, as sales of such add-on content to packaged video games were 12 percent of overall sales. This is up from 3 percent a year earlier.

The company said Wednesday it expects to post adjusted earnings of 20 cents to 30 cents per share on sales of $250 million to $300 million for the second quarter. Analysts expect a profit of 7 cents per share on sales of $267.4 million, according to a poll by Thomson Reuters.

For the full year, however, the company still expects to report a loss, as it has long struggled to report a profit in years when it does not release a new “Grand Theft Auto” title.

Broadpoint.AmTech analyst Benjamin Schachter said the first quarter was “solid” relative to expectations, helped by better than expected sales of older, “catalog” titles and the company’s move to contain operating costs.

But noting that Take-Two is still unprofitable for the year, the analyst said “we continue to recommend that investors stay on the sidelines until we get more visibility around potential profitability.” He kept his rating at “Neutral” and raised his target price to $9 from $8.

Michael Pachter at Wedbush Morgan also kept a “Neutral” rating on Take-Two, saying a strong 2010 product lineup and strength in catalog and digital sales is “overshadowed by recurring product delays.”

The company, he noted, moved “Red Dead Redemption” to the third quarter from the second, and “Mafia II” to the fourth quarter from the third. It also said one of its big releases scheduled for the fourth quarter may get pushed into the first quarter of 2011.

“Once the company can demonstrate a path to consistent profitability, we will become more constructive,” Pachter wrote. Take-Two, he added, “must focus on streamlining its development process, and provide better visibility on future game releases.”

The average Take-Two game, the analyst said, takes much longer to develop than the industry average of two years, which drives up costs and makes it difficult to make a profit.

Shares of the New York-based company rose 77 cents, or 8.5 percent, to $9.80 in midday trading. The stock has traded in the 52-week range of $5.63 and $12.57.