The maker of “Grand Theft Auto” is stealing the Wall Street spotlight.
After Take2 Interactive’s stock got sacked by rival Electronic Arts’ exclusive deal with the National Football League last Dec. 13, the video game company’s shares have steadily advanced and are now up 20 percent.
The increase, to $40.05 from $33.45 in a little over two months, was fueled by Take2’s exclusive third-party deal with Major League Baseball in January and last week’s deal with the National Basketball Association. Both long-term pacts are convincing Wall Street that the company is no longer a one-trick pony that is, having its fortunes tied much too closely with its biggest hit, the “Grand Theft Auto” franchise.
Take2 also signed superstar Yankee shortstop Derek Jeter to promote its “2K” baseball games and in January acquired Visual Concept Entertainment and Kush Games from Sega. The two are developers of some of Take2’s sports properties.
“With investment, we believe Take2 continues to chip away at the sentiment that it is an undiversified company,” Bear Sterns analyst Glen Reid said in a recent statement.
Eager to show investors that the company is moving away from its strong reliance on its top-selling “Grand Theft Auto” line, executive vice president Cindi Buckwalter this month told analysts that “Take2 has over 15 titles that are million-unit sellers.”
Also helping to put some investor uneasiness to rest is the proposed $7.5 million settlement the company made to the Securities and Exchange Commission in the first quarter. That settlement is related to a probe of accounting irregularities, which cast a pall over almost all of 2004.
But even with all its advances of late, Take2 still leans disproportionally heavily on “Grand Theft Auto” and its other best sellers.
In the first quarter ended Jan. 31, more than half its $502.5 million in revenue (57 percent, or $287 million) was generated by “Grand Theft Auto: San Andreas,” which was released in October.
And the company’s top 10 titles were responsible for 64.8 percent of sales in the quarter compared to 52.2 percent of total revenue in the year earlier quarter.
But some on Wall Street feel those numbers will soon be changing.
The added sports titles will be filling up store shelving starting in 2005 and 2006. Plus, a strong seller, “Midnight Club 3:DUB Edition,” is due out April 12.
To further convince investors that they are truly the comeback kids, Take2 will launch “Grand Theft Auto” and “Midnight Club” for Sony’s new PSP platform, which has a monstrous debut last Thursday.
At the same time, Electronic Arts, the country’s No. 1 video game producer, with titles like “Madden NFL Football,” “Need for Speed Underground” and “The Sims,” has seen their stock fall by 9 percent since they inked the NFL deal.
The biggest drop, almost 17 percent, came last week after the company said holiday sales were weaker than expected. EA shares closed at $55.17, down from $60.61 the day it inked the NFL deal.
EA blamed a shortage of Sony PlayStation 2 unit during the holiday selling season, but industry chatter laid the blame equally on poor sales of its older, back-of-the-book titles.