Contrarian Stock Market Investing News - Featuring Bargain Stocks » TTWO

Delays Hit Video Game Maker’s Guidance Hard

Bob Blandeburgo — Wed, 15 Jul 2009 15:00:00 +0000

Shares of “Grand Theft Auto” maker Take-Two Interactive (Nasdaq:TTWO) took a drubbing yesterday (Tuesday) after it lowered its financial outlook and delayed key video game releases until its next fiscal year.

Take-Two now expects its loss to fall between 65 cents and 75 cents per share and revenue to be between $120 million and $130 million for the quarter ending July 31. Wall Street analysts were expecting a loss of 54 cents and revenue of $162.2 million.

The move reflects reduced sales of catalog products and lower than anticipated initial retailer orders of new releases due to a retail environment that is proving even more challenging Take-Two expected, it said in a statement.

The company delayed the release of “Bioshock 2,” “Max Payne 3” and “Red Dead Redemption” to fiscal 2010, which starts November 1. It is unclear whether any of these titles will ship in time for the holiday season, a critical time for the $22 billion video game industry.

“The decision to shift a release date is never an easy one, especially with a product as highly anticipated as ‘BioShock 2,’” said Take-Two Chief Executive Officer Ben Feder. “We felt that it was essential to invest the additional time to ensure that this title will deliver what its fans expect and deserve.”

Had “Bioshock 2” not been delayed, 2 million copies would have shipped in Take-Two’s fiscal fourth quarter ending October 31, Wedbush Morgan Securities Inc. analyst Michael Pachter said in a note to investors obtained by The Associated Press. Such a shipment would have generated $90 million in revenue, Pachter said.

Still, Pachter reiterated his “outperform” rating on the company, attributing the rating to next year’s earnings and the next title in the popular “Grand Theft Auto” series, which Take-Two has not given any indication of shipping next year.

Shares of Take-Two closed at $8.10 yesterday, down 9.80%.

Once thought of as recession-proof, the video game industry has suffered a series of tough losses in the last few quarters, particularly with industry giant Electronic Arts (Nasdaq: ERTS), which has suffered losses in the hundreds of millions this fiscal year.

Despite Take-Two’s delay of key holiday titles, a slew of big-name titles from other players in the industry will propel the stocks of companies that publish video games, particularly Activision Blizzard Inc. (Nasdaq:ATVI), a possible second-half wonder as reported by Money Morning.

Source: Delays Hit Video Game Maker’s Guidance Hard

How To Make Real Profits In The Virtual World

Martin Hutchinson — Mon, 01 Dec 2008 13:26:15 +0000

The video game industry has a reputation for being recession proof. And soaring sales this year suggest there are some great profit opportunities in the sector. That’s why the Money Morning team have created this comprehensive guide to virtual investing.

If you want to invest in video games there are, essentially, four ways to do it…

Investing in video game publishers.

Investing in video game retailers.

Investing in companies that make video game consoles.

Investing in companies that make video game accessories.

Game Publishers

These are the companies that make the games. And Electronic Arts Inc. (NASDAQ:ERTS) and Activision Blizzard (NASDAQ:ATVI) are the best bets right now.

Electronic Arts is the publisher of the popular Madden franchise, which gives it a consistent intake every year. Adding to its arsenal with a game like Spore will no doubt boost its bottom line even further.

Activision Blizzard is another strong contender. Guitar Hero has proven extremely popular, as has World of Warcraft. And while the new Call of Duty probably won’t sell as well as its hugely successful predecessor, Call of Duty 4, it will no doubt turn a respectable profit.

Avoid THQ Inc. (NASDAQ:THQI), which seems to have forgotten what games are and Take-Two Interactive (NASDAQ:TTWO), which is overly reliant on its controversial Grand Theft Auto series. Take-Two also had a good opportunity to be taken over by the much larger Elecrtonic Arts, but a deal never got done, which raises questions about the company’s management.

Accessories

As the unrivaled success of the Wii showed, innovation in video game accessories can pay off. For every console, as well as the PC, there are multiple games that can be enhanced by the use of a new input medium.

Games such as Guitar Hero, a game where you use a guitar shaped controller to play along with music, Flight Simulator X – the premiere flight simulator game is greatly enhanced by the use of a joystick, and the Dance Dance Revolution series, which features games that are best played with a dance pad, are always emerging on the market.

While, most of the accessories are made by the company of the game that requires them, there are external controllers that are always there competing for the market. Some companies that make these include MadCatz Interactive Inc. (AMEX:MCZ), a peripheral company specializing in mainly console accessories and Logitech International (NASDAQ:LOGI) a Swiss company that specializes in mostly in PC peripherals.

Retailers

While many electronics stores and retailers sell video games, there are some specifically designed to do so. The biggest of these in the world is GameStop Corp. (NYSE:GME). GameStop stocks new, used and old games, as well as multiple accessories and consoles. The largest video game retailer in Europe is GAME Group PLC (London:GMG). They operate similarly to GameStop.

Consoles

More than $9 billion was spent on video game consoles last year. Nintendo, Microsoft, and Sony all have new systems on the market, and they’ve all proved formidable.

[...] All of these companies are reasonably solid investments, but, in terms of gaming, Sony Corp. (NYSE:SNE) and Nintendo Co. (Pink Sheets:NTDOY) look like they are going to have some very good years.

Sony has got an amazing games division that is producing very high quality games for its console. And Nintendo is always going to be in demand, though it needs to start making more games for the Wii and DS.

Microsoft Corp. (NASDAQ: MSFT), on the other hand, needs to acquire more exclusives, plus this report has nothing to do with the upcoming Windows 7, which is the biggest part of Microsoft’s business.

Hon Hai Precision Industry Co.

Hon Hai Precision Industry Co. (OTC: FXCNF) is a technology company based in Taiwan. It manufactures the Mac mini, the iPhone and the iPod for Apple Inc. (AAPL), cell phones for Nokia Corp. (NOK), and motherboards for Intel Corp. (INTC).

Of course, it also manufactures PS2, PS3, Xbox 360, and Wii – the four most popular gaming consoles – making it a tremendous play on the video game industry.

Emerging Markets: The Future of the Gaming Industry

The Middle East, China, India, Africa, and South America all have extreme pirating problems where video games are concerned. Thus, most companies have trouble expanding into these markets.

The Chinese market is a rapidly growing area for video games. However, the video games that the Chinese are enjoying are not what the West is enjoying. Chinese consumers love MMORPGs. While an average Western MMORPG, like Everquest for example, will reach 500,000 users. An AVERAGE Chinese MMORPG will attract well over 1,000,000 users very quickly.

Of World of Warcraft’s 10 million subscribers, 1.5 million live in China. Analysts estimate that the WoW Chinese market, alone, could eventually have 10 million users.

Most Chinese play MMORPGs in internet cafés (since most of them have limited Internet access). A large percentage of Chinese, however, do play free MMORPG’s. Free MMORPGs usually are completely free to play, but players can pay money to expand the gaming experience (bigger map to play on, more areas etc.) or improve their character (items, weapons character stats, etc.). While this doesn’t seem to like it would make a lot of money, it actually does, thanks to the addictive nature of most MMORPGs.

Some of the bigger names in the Chinese MMORPG market are Giant Interactive Group Inc. (NYSE:GA), Perfect World Co. Ltd. (Nasdaq:PWRD), Shanda Interactive Entertainment Ltd. (Nasdaq:SNDA), and The9 Ltd. (Nasdaq:NCTY).

Unfortunately, China is China. As such, the government always thinks of something ‘imaginative’ to do with the gaming market. The ‘Fatigue System’ is a means by which the government gets to control how long its citizens spend online playing games.

This system requests that games stop rewarding players after three hours of play in one day. Additionally, the system also requests an ID for players so as to be able to control their play more easily. While the system was originally meant for all gamers, it has been limited to gamers under the age of 18, due to the initial outcry it garnered.

China is also notorious for having the largest game sweatshop industry in the world. A game sweatshop is where a person is paid to play a game intensively and to make an extremely good character in it. That character is then sold to whomever wants it.

Chinese censorship is surprisingly low as the government only censors games that are anti-Chinese or portray Tibet and Taiwan as independent nations.

India’s market has yet to fully realize the potential of video games (putting the pirating aside). India is regularly compared to China in 2001. The online video games market is picking up but the overall market is still small. The few Indians who do game, do so like the Chinese: in Internet cafés. Unfortunately, there aren’t any enormous MMORPG makers (or equivalents) in India, yet.

The Middle East is generally also a pirating heaven though there are some legitimate shops usually selling games that haven’t been translated. Countries like Saudi Arabia also tend to ban certain games that are conceived as anti-Muslim.

If you wanted to invest in one of the Chinese MMORPG makers, the one that looks the best thanks to its pricing model and quality of games is Giant Interactive.

PS. This is an excerpt from a three-part guide to investing in the video game industry. For the complete version, please go to Money Morning’s archive pages.

Source: The Investor’s Guide to The Video Game Industry – Page 2

Buy These 3 Bargain Small-Cap Stocks for Fall Profits

Laura Cadden — Tue, 23 Sep 2008 13:37:24 +0000

The Dow plunged over 370 points in yesterday’s going, wiping out Friday’s spectacular gains for big-name stocks.

But there are profits to be made in the small-cap market says Laura Cadden in Today’s Financial News. She’s found three great small-cap stocks going for bargain prices. All three have solid valuation ratios and strong short-term growth prospects.

They are Javo Beverage Company (OTC:JAVO), The Home Shopping Network (NASDAQ:HSNI), and Take-Two Interactive Software (NASDAQ:TTWO).

Best Small Cap #1

A poor man’s Starbucks: Javo Beverage Company, Inc. (OTC:JAVO).

Ah… coffee. Coffee addicts NEED their java. But we’ve already seen that in tough times, people are stepping away from the Starbuck’s counter.

That’s where these guys come in.

Good, fast and CHEAP coffee

Javo Beverage Company, Inc.’s main focus is on dispensable tea and coffee. The company manufactures and markets beverage concentrates, as well as formulations, extracts and flavors, to restaurants and retail outlets.

A sampling of their client list includes 7-Eleven, Sysco Food, BP Products North America, Exxon-Mobil, Mrs. Fields, Haagen-Dazs, Caribou Coffee, Sunoco, Shamrock Foods and Speedway.

Javo greatly increased their outlet potential in the second quarter of this year resulting in excellent results primarily from iced coffee sales.

On July 30, the company announced record revenues for the second quarter of 2008 of 6.7 million. A record gross margin of a remarkable 49% was also achieved for the quarter.

Javo’s target for dispenser installation for this year was 7,500. They achieved that goal by the end of July.

Turning to their hot coffee product, they are now ready to have 10,000 dispensers in place by year’s end. Each new location is anticipated to produce between $3,000 and $6,000 in revenue annually.

This company is one of the most promising small caps I’ve seen this year and the price is below $1!

What’s not to love?

I recommend you buy shares of Javo Beverage Company, Inc. (OTC:JAVO) for at or under $0.60 a share.

*****

Best Small Cap #2

On the cutting edge of retail: The Home Shopping Network (NASDAQ:HSNI)

Her name is Mary-Ann and she is an addict.

Her addiction? The Home Shopping Network (HSNi) owned and operated by HSN, Inc.

Mary-Ann (actually NOT her real name) tells me that she can’t help it… the convincing chatter by charming hosts, the phoned-in testimonials, the seemingly reasonable prices, the “limited number available” push, and the countdown clock – it just wins her over every time.

She’s not alone… The 24/7 HSNi channel reaches 90 million households in the U.S.

And in 15 million of those homes, they also have the latest technological advance in TV purchasing – Shop By Remote.

In addition, HSNi has one of the top 10 e-commerce websites (http://www.hsni.com).

Cornering the market

HSN Inc. has another operating segment, Cornerstone, which is made up of seven popular brands including The Territory Ahead, Smith+Noble, Frontgate, Ballard Design, Garnet Hill, Improvements and Travelsmith.

Each brand has its own website and catalog (400 million are mailed out annually!).

HSN, Inc. began trading on its own in late August.

Formerly, it had been part of IAC/InterActiveCorp (NASDAQ:IACI) but was spun off along with Interval Leisure Group, Inc. (NASDAQ:IILG), Ticketmaster (NASDAQ:TKTM), and Tree.com Inc. (NASDAQ:TREE).

Since the separation (and the volatile market in recent weeks) the stock price has decreased in value.

Its current PE ratio is hovering around 6 – always a good thing!

Most importantly, these people KNOW how to sell and with the peak retail season fast approaching, I expect this stock price to climb steeply.

I recommend you buy shares of HSN Inc. (NASDAQ:HSNI) at or under $12.

*****

Best Small Cap #3

Failure to merge = good news for you: Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

After prolonged negotiations, Electronic Arts Inc. (NASDAQ:ERTS) will not be purchasing Take-Two Interactive Software, Inc.

News of this prompted seven-year lows in the stock price of Take-Two providing a great buying opportunity.

Highway robbery

Take-Two’s claim to fame (or infamy, depending on your perspective) is its “Grand Theft Auto” video game series.

Wildly successful, these games often top the list of objectionable entertainment due to their seeming glorification of criminality and excessive violence. (No doubt that accounts for much of their popularity.)

A sampling of Take-two’s other franchises include Sid Meier’s Civilization, Manhunt, BioShock, Sid Meiers’s Railroalds!, Top Spin, Sid Meier’s Pirates, and Max Payne.

Headquartered in New York City, the company’s publishing segment is made up of Rockstar Games, 2K Games, 2K Sports and 2K Play labels.

Can’t argue with the numbers

After a showing a negative balance in 2007 (with a net margin of –14.10%), Take-Two clearly buckled down their operating expenses. That, and the over 6 million(!) copies of Grand Theft Auto IV sold after its April release, resulted in an increased net margin of 11.95% as of Q3 (ending July 2008).

The company’s PE ratio is just under 12, its forward PD is 10.81 and its PEG is an amazing .56. Now with recent market devaluations, these numbers are not the full picture, but they are still indications of a good investment.

On the table

The Take-two executive chairman of the board, Strauss Zelnick, has said that the company is communicating with other parties to consider “strategic alternatives.”

Any additional takeover bids should be good for shareholders.

Besides the decent fundamentals, profits and buyout possibilities, there are all those fans that failed to get “GTA IV” in the spring. They will no doubt be placing it at the top of their hoped-for holiday gift lists, which should give the stock price a nice bump.

I recommend you buy shares of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) at or under $21.

Source: The 3 Best Small Caps to Own This Fall: A TFN Special Report

Global Investing Roundups Tuesday, September 16th, 2008

William Patalon III — Tue, 16 Sep 2008 14:07:36 +0000

Electronic Arts Ditches Take-Two; Nucor’s Positive Outlook; Best Buy Snaps up Napster; Target’s New Ballpark; Oil Hits Six-Month Low; Wilbur Ross Expects 1,000 U.S. Banks to Fail; Hewlett-Packard Slashes Payrolls

Take-Two Interactive Software, Inc. (TTWO) shares plunged yesterday (Monday) after Electronic Arts Inc. (ERTS) withdrew its bid for the maker of the popular Grand Theft Auto 4 video game. Take-Two shares shed $5.32, a decline of 24%, to close at $16.57. But Ben Feder, Take-Two’s chief executive, said in an interview yesterday the company is “very, very happy to stay independent,” The Associated Press reported.

Steelmaker Nucor Corp. (NUE), a recent feature in Money Morning’s “Buy, Sell or Hold” column, raised its third quarter earnings target, The Wall Street Journal reported. Due to improved performance and recent acquisitions, Nucor upped its project to $2.15 – $2.20 per share from an earlier estimate of $1.80 – $1.85 per share. Nucor’s recent acquisitions include scrap purchaser SHV North America and Harris Steel Group Inc.

Electronics retailer Best Buy Co. Inc. (BBY) announced yesterday (Monday) that it would purchase Napster Inc. (NAPS) in a deal valued at $121 million. Best Buy’s acquisition includes Napster’s roughly 700,000 subscribers, its Web-based customer-service platform and mobile capabilities, MarketWatch reported.

Target Corp. (TGT) and the Major League Baseball’s Minnesota Twins announced a deal that will put the second-largest U.S. discount retailers name on the new ballpark that is expected to be ready in time for the 2010 season, Bloomberg News reported. It’s the second sports venue contract for the Minneapolis-based Target, which already has its name on the arena of the National Basketball Association’s Minnesota Timberwolves.

Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling more than $5 as the outlook for both the global and domestic economy darkened. Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange – the first time crude has settled under $100 a barrel since March 4.

Wilbur Ross, chairman and CEO of WL Ross & Co. LLC, said in an interview with CNBC that as many as a thousand banks could fail in the coming months. “I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s,” Ross said.

Hewlett-Packard Co. (HPQ) announced yesterday (Monday) that it plans to cut over 24,000 jobs as part of its takeover of Electronic Data Systems (EDS). The cuts represent about 7.5% of the two company’s combined workforce, MarketWatch reported. The restructuring should result in an ultimate $1.8 billion in annual savings.

Source: Global Investing Roundups Tuesday, September 16th, 2008

EA Drops Hostile Bid for Take-Two but a Friendly Deal Could be Imminent

Jason Simpkins — Tue, 19 Aug 2008 14:55:15 +0000

Electronic Arts Inc. (ERTS) dropped its $2 billion hostile takeover of video game publisher Take-Two Interactive Software Inc. (TTWO) yesterday (Monday), but the two companies have entered into private discussions that may finally result in a friendly merger.

Relations between the two companies began to thaw Friday, when Electronic Arts Chief Executive Officer John Riccitiello placed a call Take-Two Chairman Strauss Zelnick. After a weekend of discussions, EA announced that after six months, it would not extend the deadline for its hostile takeover bid.

EA said yesterday that its $25.74 a share offer was contingent on being able to distribute Take-Two products during the 2008 Christmas season. But since there is no longer any chance of that happening, EA must “validate the assumptions” inherent in its previous offer.

To assuage EA’s concerns Take-Two has agreed to present the company with its three-year product lineup, as well as financial forecasts.

In a letter made public yesterday, Take-Two’s Zelnick said his company looks forward to showing EA, and its board members, “the significant strides made by Take-Two since [Electronic Arts] last undertook a detailed review of our business in early 2007.”

However, Zelnick also reiterated his previous claim that a bid of $25.74 a share “undervalues Take-Two’s franchise and financial performance.”

EA initially offered $26 dollars a share for Take-Two in February, but lowered the bid to $25.74 a share after Take-Two issued additional shares. EA extended the deadline for the offer five times in an attempt to wear Take-Two investors down, and to give antitrust regulators ample time to review the deal.

“They are both posturing,” Wedbush Morgan analyst Michael Pachter told The Associated Press. “EA is saying ‘we want to pay less,’ Take-Two is saying they want more. The important thing is that they are talking.”

EA is very interested in Take-Two’s hit “Grand Theft Auto” series, which has garnered a reputation among parents and young adults alike for its graphic violence and sexually charged content. The latest installment of the series, “GTA IV,” was released on April 29 and been a boon for Take-Two.

The game sold 11 million units and pulled in gross revenue of $500 million in its first week. GTA IV’s success alone was enough to push fiscal 2008 revenue estimates to a range of $1.4 billion to $1.5 billion. The previous range was $1.25 billion to $1.4 billion.

Sales from the Grand Theft Auto franchise accounted for 78% of Take Two’s total sales last quarter.

Outside of Grand Theft Auto, Take-Two’s product line runs thin but includes well-known games such as “Civilization” and “BioShock,” which is being made into a movie. And EA is looking to bolster its arsenal to compete with rival Activision Bizzard Inc. (ATVI), maker of the hit “Guitar Hero” series.

“A mutual deal is going to have to be higher than $25.74, in order for the board of Take-Two to save face – call it a dollar or two dollars more,” Hudson Square Research analyst Daniel Ernst told Reuters. “EA can certainly afford to pay more.”

Source: EA Drops Hostile Bid for Take-Two but a Friendly Deal Could be Imminent

Global Investing Roundups: Tuesday, May 20th, 2008

William Patalon III — Tue, 20 May 2008 14:25:44 +0000

Lowe’s Reports 1Q Declines; Oracle of Omaha for Obama; Microsoft, Yahoo at it Again; Staples Launches Hostile Takeover of Corporate Express; News Corp. Increases Premier Stake; Take-Two Snubs EA; Pacific Ethanol Stock Surges Despite Loss; Feds to Investigate DeVry.

Lowe’s Cos. Inc. (LOW) coughed up a rough first quarter, reporting a 18% decline in profit as the declining U.S. housing market and weakened dollar cut customer spending. The No. 2 home-improvement retailer in the United States also lowered its full-year outlook and revisiting plans for store expansion, MarketWatch reported.

Billionaire investor Warren Buffett told AFP that he’s backing Barack Obama for the presidency. Buffett said he’d offer support to either Obama or Hillary Clinton, but leaned in favor of the Illinois senator. “I will be very happy if he is elected president,” Buffett said.

Microsoft Corp. (MSFT) is once again trying to team up with Yahoo Inc. (YHOO) though the renewed talks have not yet escalated to another takeover attempt. The Associated Press reported that discussions were revived Sunday, but Microsoft refused to offer up any specifics about the nature of the deal being explored except to say it involved bolstering the companies’ position in the online search and advertising markets.

Office supplies retailer Staples Inc. (SPLS) yesterday (Monday) launched a hostile $2.34 billion bid for Corporate Express NV (CXP), as the Dutch office supplier was unwilling to negotiate, Reuters reported. Corporate Express rejected Staples’ $12 (8 euros) a share offer last week saying it significantly undervalued the company. Based on 182.848 million Corporate Express shares outstanding, the equity value is worth $2.26 billion (1.46 billion euros). Including net debt, the value is $4.3 billion (2.8 billion euros), Staples said.

News Corp. (NWS) said yesterday (Monday) that it raised its stake in Premiere AG, a German pay-TV operator, to 25%, the Associated Press reported. News Corp., which previously owned 22.7% of the company, has been increasing its stake in Premiere since January, when it bought a 14.5% stake the from cable operator Unitymedia. Premiere has more than 4 million subscribers in Germany and Austria.

Video game maker Take-Two Interactive Software Inc. (TTWO) once again rejected rival Electronic Art Inc.’s (ERTS) $2 billion hostile takeover offer. Due in part to the strength of Take-Two’s release of Grand Theft Auto 4, management recommended that shareholders not accept EA’s offer, Reuters reported.

Pacific Ethanol Inc. (PEIX) shares more than doubled yesterday (Monday) as first quarter results beat expectations. The ethanol producer lost $35.2 million, or 90 cents per share, compared to earnings of $3 million, or 5 cents per share, for the same period the year prior, The Associated Press reported. But if not for a one-time charge of 96 cents, the company would have posted a first-quarter profit of 6 cents per share. Shares gained $1.94, an increase of 60%, to close at $5.14.

Shares of for-profit education firm DeVry Inc. (DV) dropped yesterday (Monday) on news that the federal government is investigating the firm’s recruitment policies, The Associated Press reported. DeVry stock shed $2.47, a 4.36% decline to close at $54.20. DeVry has pledged to cooperate fully with the investigation.

Global Investing Roundups: Tuesday, May 20th, 2008