Take-Two's 2023 Continues to Disappoint; Value of Blockbuster IP Increases Due to Economic Woes

Take-Two Interactive Software reported a fiscal 2023 third quarter slightly below expectations and lowered its full-year guidance, which includes 10 months of contribution from Zynga. The lower guidance was due to decreased mobile expectations along with the secular shift toward blockbuster franchises that both Ubisoft and EA previously called out. Management remains optimistic about the long-term growth potential for the combined business even with the advertising headwinds for Zynga. We are maintaining our $165 fair value estimate as we expect Take-Two's extensive game pipeline and proven franchises to overcome the current challenges.