Aug 27, 2010 10:04 AM PDT
Take Two Interactive Software (TTWO) is a company which develops, manufactures and distributes interactive video games for various TV gaming platforms as well as personal computers. The company operates through four wholly owned labels those being Rockstar Games, 2K Games, 2K Sports and Global Star Software. A few of their better known games include the controversial Grand Theft Auto Series which is made up of 18 different games, Max Payne, Major League Baseball 2K9, NHL 2K9 and many more games in total 178 games. The company showed up on my screens because there was a very large and unusual volume surge during yesterday's trading. The volume surge was due to the news being let out that the company is partnering with Feld Entertainment in cooperation with Ringling Bros and Barnum & Bailey to develop a new line of interactive circus related video games. This new line of games represents a sizeable shift from Take Two's current repertoire of games, and could possibly bring in a new group of gamers who are not interested in the standard shooter, or sports games. One warning Take Two was investigated and settled with the SEC for back dating stock options between 1997 and 2003, all of the management which was involved with alleged scheme have since been replaced and since 2003 the company has not incurred any more run ins with the SEC to the best of my knowledge.
From a technical stand point Take Two Interactive appears to be starting an upward trend after breaking out of the trading range in which it had been stuck since the beginning of the year, with the creation of a new high for 2009 on 4/13. In looking back at the history of the price movement of the stock Take Two really seems to move along pretty slowly and then all of a sudden jump either up or down, all on news of new games which will be coming out or on the news that a game is going to be delayed. Typically the moves are larger than what we have seen so far for the Ringling Bros news release. As stated earlier, volume surged much higher than typical yesterday with volume being more than 3 times the 50 day moving average of volume. The Relative Strength indicator is currently below 50 but in a short term upward trend, and with the move yesterday the Twiggs Money Flow indicator jumped above the zero line and created a new high for 2009.
From a fundamental point of view Take Two Interactive Software is in a very good position, with having a good stock pile of cash and relatively low levels of debt. The current assets to current liabilities ratio is currently over 2 as of the company quarter end (1/31/09). TTWO's total assets to total debt ratio is over 2.5 , and the companies level of current liabilities have be steadily declining each quarter for at least the past 4 quarters. A few of the standard fundamental ratios include ROA of 8.89%, ROE 16.7% Profit margin 5.45% and an Operating Margin of 7.66%. One negative for the company as well as the industry which it is in, is that video games are very much a consumer discretionary item, and if the economy gets worse or stays down for a prolonged period of time I cannot help wondering if sales are really going to take a hit as people spend what money they have on more important items than the latest video game. I would recommend playing this stock for a short term gain and then getting out if the economic slowdown is persisting. A typical jump, after a large game announcement for this stock is between 30 and 60 percent, so far the majority of a move that size has not been seen this time around. I would look to get out of the stock in the near term $13.5 to $14 range.
