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Take-Two stock drops after game delays, disappointing earnings outlook

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Take-Two Interactive Software Inc. shares fell in the extended session Monday, after the videogame publisher topped earnings estimates for the quarter but provided a weaker-than-expected forecast and said it was delaying the release of some titles.

“For the year, we are reiterating our outlook, as there has been some movement in our release schedule, including two of our immersive core titles shifting to later in fiscal 2022 than contemplated by our prior guidance,” said Strauss Zelnick, Take-Two’s
TTWO,
-0.12%

chairman and chief executive, in a statement.

Even on the conference call, Take-Two executives stuck to the script of “two of our immersive core titles,” and did not specifically name the delayed titles in question.

Take-Two forecast fiscal second-quarter earnings of 35 cents to 45 cents a share on revenue of $740 million to $790 million, and $1.95 to $2.20 a share on revenue of $3.14 billion to $3.24 billion for the year.

Analysts surveyed by FactSet had estimated 47 cents a share on revenue of $788.6 million for the second quarter, and $2.87 a share on revenue of $3.3 billion for the year.

Take-Two publishes such videogame franchises as “Grand Theft Auto, and “Red Dead Redemption” under its Rockstar Games label, and “Borderlands” and “NBA2K” under its 2K label.

On the call, Zelnick said the delayed game releases were not a result of the COVID-19 pandemic interfering with production schedules.

“We needed more time to polish them and make sure they’re best title they possibly can be,” Zelnick said. The onus on videogame publishers to release flawless games became much greater following last year’s embarrassingly buggy release of the long awaited “Cyberpunk 2077” from CD Projekt SA
CDR,
-5.27%

that forced distributors like Sony Corp.
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-1.52%

to offer full refunds.

On the call, Take-Two acknowledged that the surge in gaming demand last year, because of COVID-19 stay-at-home mandates, made for difficult comparisons this year.

For example, on the conference call, Chief Financial Officer Lainie Goldstein said the company expected “Grand Theft Auto” gamer participation to “moderate” from a year ago.

“For the full year, we expect moderation of the trends that benefited us from the industry last year due to COVID and the sheltering at home,” Goldstein said. “So, Q1 was down versus last year, did not beat our expectations, and Q2 is going to be up because of the update which is doing really well. So, we do expect Q3 and Q4 right now to be down, but ‘GTA Online’ always surprises us.”

Take-Two shares, which had fallen as much as 5% after hours, were last down 3.2%, following a 0.1% decline in the regular session to close at $173.21.

For the fiscal first quarter, Take-Two reported net income of $152.3 million, or $1.30 a share, compared with $88.5 million, or 77 cents a share, in the year-ago period. Revenue declined to $813.3 million from $831.3 million in the year-ago quarter.

Analysts had forecast earnings of $1.11 a share on revenue of $737.8 million.

Over the past 12 months, Take-Two shares have gained 5.6%, while the iShares Expanded Tech-Software Sector ETF
IGV,
+0.03%

and the tech heavy Nasdaq Composite Index
COMP,
+0.06%

have both grown nearly 37%, and the S&P 500 index
SPX,
-0.18%

has gained 34%.

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