Last Update 19 Jan 26

Fair value Increased 24%

TTWO: Fair Value View Balances Content Pipeline Hopes And Execution Risks

Analysts have raised their fair value estimate for Take-Two Interactive Software to US$226.19 from US$181.99, reflecting higher assumed revenue growth, margins, and future P/E multiples, in line with recent Street price target increases into the US$280 to US$288 range.

Analyst Commentary

Recent Street research shows a mix of optimism around Take-Two Interactive Software's content pipeline and cautious views around valuation and execution risk. While some firms have raised price targets into the high US$200s and see upcoming quarters as supportive for the story, there are also more guarded voices that highlight where things could disappoint if expectations run too far ahead of delivery.

One research house raised its price target to US$288, citing higher Q3 bookings assumptions, stronger third party mobile data, and better than previously expected performance from Toon Blast and GTA Online following the December "Safehouse in the Hills" content release. Another lifted its target to US$280 and grouped Take-Two with internet names that could be rewarded if they show clear returns from GenAI or GPU enabled technologies.

At the same time, not all coverage is leaning positive. One firm moved its rating to Neutral with a US$280 price target, which sits close to the upper end of the current fair value and Street target range. That shift adds a more balanced tone to the debate and underlines the idea that execution against these higher expectations will be closely watched.

Bearish Takeaways

Bearish analysts see the US$280 to US$288 price target range as leaving less room for error, with valuation already reflecting strong bookings and content performance assumptions.
The move to a Neutral rating at a US$280 target signals concern that upside may be more limited if upcoming releases or live service content do not consistently match recent momentum.
There is an implied risk that expectations around GenAI or GPU enabled returns are ahead of what the business has clearly delivered so far, which could pressure the stock if that narrative cools.
Stronger Q3 bookings assumptions, including reliance on titles like Toon Blast and GTA Online additions, introduce execution risk if player engagement or monetization trends fall short of these higher forecasts.

What's in the News

Rumors of another potential delay for "Grand Theft Auto VI" briefly affected Take-Two's stock after comments on a podcast were misinterpreted, with Bloomberg reporting there is no indication a new delay is imminent and that the game is still being finalized in a way consistent with past Rockstar patterns (Bloomberg).
Rockstar Games faces allegations from British and Canadian trade unions that recent terminations of between 30 and 40 workers were intended to prevent unionization, while the company states the dismissals were for gross misconduct and not related to organizing efforts (Bloomberg).
A U.K. employment tribunal rejected a request for interim pay from former Rockstar employees who claim they were dismissed for union activity, with the judge ruling they had not yet shown a strong likelihood of proving their case as the broader legal process continues (Bloomberg).
"Grand Theft Auto V" and "Red Dead Redemption 2" remain present in European top 10 unit sales charts, appearing alongside other major titles such as "Battlefield 6", "EA Sports FC 26", and "Pokemon Legends: Z-A" in recent GSD data (The Game Business).
Rockstar's 2010 title "Red Dead Redemption" is scheduled to launch on mobile and on Netflix's gaming platform on December 4, 2025, with listings also indicating versions for PlayStation 5, Xbox Series X/S, and Nintendo Switch 2 (The Verge).

Valuation Changes

The Fair Value Estimate has risen meaningfully from US$181.99 to US$226.19, reflecting a higher assessed worth per share under the updated model.
The Discount Rate has moved slightly higher from 8.76% to 9.13%, indicating a modestly higher required return used in the valuation.
The Revenue Growth assumption has increased from 11.17% to 13.85%, pointing to a stronger expected top line trajectory in the model inputs.
The Net Profit Margin assumption has risen from 10.11% to 11.70%, indicating that earnings as a share of revenue could be higher than previously modeled.
The future P/E multiple has edged up from 56.55x to 58.02x, implying a slightly higher valuation multiple applied to projected earnings.

Weak trends in mobile franchises and high expenses could negatively impact revenue and net margins.
Development and marketing costs for new titles may suppress profit margins before realizing future profitability.
Take-Two Interactive's strategic game releases and strong franchise performances support stable revenue growth and profitability, bolstered by mobile gaming and market expansion.

Catalysts

About Take-Two Interactive Software

Develops, publishes, and markets interactive entertainment solutions for consumers worldwide.What are the underlying business or industry changes driving this perspective?

Despite strong performance from NBA 2K, a continuation of weak trends in some mobile franchises and a shift of operating expenses into future periods could negatively impact revenue and net margins in the upcoming quarters.
The anticipated decline in Grand Theft Auto Online revenue, alongside ongoing issues in the hyper-casual mobile division and underperformance of certain games like Empires & Puzzles, could suppress net margins and earnings.
Significant marketing and development expenditures, particularly for titles such as Match Factory! and other mobile experiences, may weigh down profit margins, even as the company aims to launch successful new titles.
As development and marketing costs in the mobile business are currently expensed, the success of games like Match Factory! could temporarily impair financial results, affecting earnings and operating margins before realizing future profitability.
While optimistic forecasts exist about future game releases, if market growth continues at a slower rate and titles fail to meet ambitious sales targets, particularly with high-profile games like Grand Theft Auto VI, this could lead to missed revenue projections and a reevaluation of future earnings potential.

Take-Two Interactive Software Earnings and Revenue Growth

Take-Two Interactive Software Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Take-Two Interactive Software compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Take-Two Interactive Software's revenue will grow by 11.2% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from -79.5% today to 10.1% in 3 years time.
The bearish analysts expect earnings to reach $782.3 million (and earnings per share of $4.3) by about July 2028, up from $-4.5 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 56.6x on those 2028 earnings, up from -9.3x today. This future PE is greater than the current PE for the US Entertainment industry at 26.9x.
Analysts expect the number of shares outstanding to grow by 1.22% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.76%, as per the Simply Wall St company report.

Take-Two Interactive Software Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Take-Two's strategic release schedule, including Grand Theft Auto VI, Borderlands 4, and other high-profile titles, indicates a strong pipeline that could positively impact their revenue and earnings in fiscal 2026 and 2027.
NBA 2K's exceptional performance, with a 30% increase in recurrent consumer spending, suggests a robust revenue stream and potential for growth in profitability given its continued audience engagement.
Increasing success in mobile games, such as Toon Blast and Match Factory!, supports growth in net bookings and recurrent consumer spending, positively affecting revenue.
Strong partnerships and expansion into new markets, such as Zynga’s collaborations with entertainment brands, have the potential to enhance revenue streams and strengthen market positioning.
The continued success of established franchises like Grand Theft Auto and Red Dead Redemption reinforces strong, stable revenue streams, contributing to steady earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for Take-Two Interactive Software is $181.99, which represents two standard deviations below the consensus price target of $247.53. This valuation is based on what can be assumed as the expectations of Take-Two Interactive Software's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $275.0, and the most bearish reporting a price target of just $144.11.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $7.7 billion, earnings will come to $782.3 million, and it would be trading on a PE ratio of 56.6x, assuming you use a discount rate of 8.8%.
Given the current share price of $228.64, the bearish analyst price target of $181.99 is 25.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

NBA 2K Success And Mobile Weaknesses Will Define Future Performance