What happened
The holiday season is generally a good time to be in the video game business. This wasn’t, however, apparent with Take-Two Interactive Software (TTWO -2.15%) stock on Monday. The company’s share price fell to close more than 2% lower following an analyst’s price-target cut.
So what
One Take-Two bull slowing his pace on the company is Edward Woo of Ascendiant Capital. On Monday well before market open, Woo enacted a more than 20% price cut, trimming his level to $126 per share from his previous $159. He didn’t change his recommendation, however, maintaining his buy on the shares.
The reasoning behind this move wasn’t immediately clear. As with other tech stocks lately, analysts like Woo have either cooled on Take-Two or tagged it as an uninspiring investment. Earlier this month, for example, ever-influential Citigroup iniated coverage of the stock with an effectively “meh,” neutral recommendation.
The big bank’s Jason Bazinet was chiefly concerned with Take-Two’s splashy acquisition of mobile games developer Zynga in May. He wrote in his initial note on the stock that the purchase was made “at the wrong time, in our view.”
“Mobile gaming revenues began to weaken just after the transaction closed,” he added. “While estimates for FY23 and FY24 have fallen, we don’t think they’ve fallen enough.”
Now what
At the moment, with tech stocks out of favor, investors don’t need much convincing to sell their positions in them. Take-Two certainly has merits as a company, but yes, that Zynga deal doesn’t seem well timed, and it might not ultimately be a great fit for its owner. Hopefully for its investors, Take-Two’s holiday season will be a successful one that will greatly improve morale on the stock.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Take-Two Interactive Software. The Motley Fool recommends the following options: long January 2023 $115 calls on Take-Two Interactive Software. The Motley Fool has a disclosure policy.
