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The Esports world is growing fast, but mostly led by Activision Blizzard. This is their domain at the moment rather than $TTWO.

Threats.
Now, the competition is strong in the industry, Some of the big giant tech companies have parts of their business in the gaming world. Tencent, Google, Microsoft are all significant players in the market. Along with the other dedicated gaming companies with Nintendo, Electronic Arts and Activision Blizzard all competing.

But after analysing both Electronic Arts and Activision Blizzard, is it clear that the industry can handle the competition.

Blockbusters
Take Two Interactive are expected to gain traction from solid demand for
NBA 2K20, (2K19 2nd best seller across the industry in 2019)
Borderlands 3 (4th)
Grand Theft Auto Online and Grand Theft Auto V, (11th)
Red Dead Redemption 2 and Red Dead Online. (12th)

2020
New Business Environment
The world is moving more toward a subscription based model approach and in game spending.
So with Take Two moving Grand theft auto and red dead redemption to these models, I do think the company is doing the right thing.
The rest of 2020 and 2021 is going to be very good for the gaming industry as more people have joined these online worlds like never before.

Take-Two Interactive’s latest financial results reveal that 58% of its revenues come from everything other than just selling games. So things like, in game purchases and subscriptions.
And nearly all of that comes primarily from Grand Theft Auto V and NBA 2K.

It was actually one of Take-Two’s best financial quarters ever, even though they didn’t have any major new games out.
For the three months ended 30 June they made
$540.5 million revenues, which represents 39% growth on the same time last year.

So pretty solid financials from Take Two. I am not really concerned about any area of their financials
I do think gross margins could be better as I compare them against EA and Activision Blizzard.
ROTE could be better as well as both EA and Activision Blizzard are far superior here as well.
I do like that they don’t have any debt.
So it now will come down to valuation.

Now the current share price as of the end of October is about $170. But I think TTWO is under intrinsic value, just not enough for me to feel good about the margin of safety, It needs about a 25% pull back which might happen.

So do I want to invest in Take Two Interactive?

(TTWO buy price = $120)
Now like I said, I’m not buying them today or anytime soon. They go onto my watchlist of a great company. But I will wait for a price that I want to pay. I might never see this price and that is totally ok.
I think the future is bright for the company, they are in a growing industry and they have good financials.
But I do think I like EA and Activision a little better than TTWO because of the gross margins and the ROTE.

I’d love to hear your thoughts on this investment as I think a lot of people will think TTWO is a great investment and I am being far too conservative.
Hit subscribe if you enjoyed my analyses and see you in the next video.

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