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| MARCH 28, 2008 |
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Now, in his latest research note on Take-Two, Wedbush Morgan Securites analyst Michael
Pachter has issued a similar forecast, predicting that the game will ship six million in its first
week and could sell more than nine million during Take-Two's fiscal year, which ends on
October 31.
"We estimate that GTA IV is likely to sell over 9 million units during the fiscal year, and think
that the company will likely ship 6 million units in its first week, and will sell 3/4 of that amount
in a brief period of time. The performance of GTA IV will thus be responsible for more than
100% of Take-Two's earnings for the year, and the game is likely to mask the under
performance of the rest of Take-Two's portfolio," he said. "We think that GTA IV will generate
around $450 million of the company's expected $1,073 million publishing revenue this year,
and will generate an operating profit of around 30%, or $135 million. At the high end of
company guidance, Take-Two will generate operating income of around $130 million,
meaning that the game is responsible for 103% of overall company operating profit."
Pachter also questioned the profitability of the downloadable episodic content for the game:
"[We think] Take-Two will have to generate over 2 million downloads (assuming a $15 per
download price) on the Xbox 360 before it sees any more cash from this content. We expect
around 6 million copies of GTA IV to be sold to Xbox 360 owners, and believe that around
65% of Xbox 360 owners are Xbox Live members, so the company has to sell a download to
50% of its addressable market in order to generate cash from the first download. This is
possible, but not highly likely."
Elsewhere in the report Pachter noted his disappointment in Take-Two as a whole. GTA IV is
the "one glaring exception," he said.
"We think that it is important to point out that U.S. industry software sales have grown by over
58% from the November 2005 – January 2006 period through the November 2007 – January
2008 period, while Take-Two's publishing revenues have declined by almost 23%. This is
clearly a company that is losing market share, and as we review the lineup for the balance of
2008 and 2009, we see more of the same type of games we have seen over the last three
years," he said. "The company's sports lineup continues to underperform, generating only
$32 million of sales (26% of publishing revenues) for the key holiday period. This figure calls
into question whether Take-Two can deliver sports revenues of $250 million for FY:08, as
management implied in a prior earnings call."
Pachter has issued a similar forecast, predicting that the game will ship six million in its first
week and could sell more than nine million during Take-Two's fiscal year, which ends on
October 31.
"We estimate that GTA IV is likely to sell over 9 million units during the fiscal year, and think
that the company will likely ship 6 million units in its first week, and will sell 3/4 of that amount
in a brief period of time. The performance of GTA IV will thus be responsible for more than
100% of Take-Two's earnings for the year, and the game is likely to mask the under
performance of the rest of Take-Two's portfolio," he said. "We think that GTA IV will generate
around $450 million of the company's expected $1,073 million publishing revenue this year,
and will generate an operating profit of around 30%, or $135 million. At the high end of
company guidance, Take-Two will generate operating income of around $130 million,
meaning that the game is responsible for 103% of overall company operating profit."
Pachter also questioned the profitability of the downloadable episodic content for the game:
"[We think] Take-Two will have to generate over 2 million downloads (assuming a $15 per
download price) on the Xbox 360 before it sees any more cash from this content. We expect
around 6 million copies of GTA IV to be sold to Xbox 360 owners, and believe that around
65% of Xbox 360 owners are Xbox Live members, so the company has to sell a download to
50% of its addressable market in order to generate cash from the first download. This is
possible, but not highly likely."
Elsewhere in the report Pachter noted his disappointment in Take-Two as a whole. GTA IV is
the "one glaring exception," he said.
"We think that it is important to point out that U.S. industry software sales have grown by over
58% from the November 2005 – January 2006 period through the November 2007 – January
2008 period, while Take-Two's publishing revenues have declined by almost 23%. This is
clearly a company that is losing market share, and as we review the lineup for the balance of
2008 and 2009, we see more of the same type of games we have seen over the last three
years," he said. "The company's sports lineup continues to underperform, generating only
$32 million of sales (26% of publishing revenues) for the key holiday period. This figure calls
into question whether Take-Two can deliver sports revenues of $250 million for FY:08, as
management implied in a prior earnings call."
Take Two's Number Crunching
Looks Great
GTA IV predicted to sell over 9M this
year
Looks Great
GTA IV predicted to sell over 9M this
year
Game Daily
Janco Partners' Mike Hickey said that
Rockstar Games' Grand Theft Auto IV would
likely sell 5.8 million units in its first week.
Janco Partners' Mike Hickey said that
Rockstar Games' Grand Theft Auto IV would
likely sell 5.8 million units in its first week.