Video game publisher Take-Two Interactive Software late Monday missed Wall Street's targets for the December quarter, citing weaker consumer spending. Take-Two also guided much lower than views for the March quarter. TTWO stock fell in extended trading.
The New York City-based company earned an adjusted 86 cents a share on net bookings of $1.38 billion in its fiscal third quarter ended Dec. 31. Analysts polled by FactSet had expected earnings of 89 cents a share on sales of $1.46 billion.
On a year-over-year basis, adjusted earnings fell 35% while net bookings rose 60%. Take-Two's purchase of Zynga last May boosted its sales in the period.
For the current quarter, Take-Two forecast adjusted earnings of 65 cents a share on net bookings of $1.34 billion. That's based on the midpoint of its guidance. Wall Street was predicting adjusted earnings of $1.06 a share on net bookings of $1.5 billion.
TTWO Stock Drops After Report
"It's disappointing in the extreme to have to guide down again," Chief Executive Strauss Zelnick told IBD. "It's not something we normally do. But the market is softer than we expected."
In after-hours trading on the stock market today, TTWO stock sank 0.9% to 104.65. During the regular session Monday, TTWO stock fell 3.4% to close at 105.56.
In a news release, Zelnick said consumers shifted their holiday spending because of macroeconomic conditions to established blockbuster franchises and titles that were offered with pricing promotions.
"While our catalog benefited from this trend, it affected the performance of certain of our new releases and recurrent consumer spending for some of our console and PC games," he said.
New Take-Two games impacted by the spending change included "Marvel's Midnight Suns" and "PGA Tour 2K23."
Activision Smashes Fourth-Quarter Views
Industry peer Activision Blizzard also reported December-quarter earnings after the market close Monday. But it crushed expectations for sales and earnings in the period. Hit games such as "Call of Duty: Modern Warfare 2," "Warzone 2.0," "Overwatch 2" and "Candy Crush" drove its results.
Santa Monica, Calif.-based Activision earned an adjusted $1.87 a share on net bookings of $3.57 billion. Analysts were looking for earnings of $1.51 a share on net bookings of $3.19 billion. On a year-over-year basis, Activision earnings jumped 50% while net bookings rose 43%.
Activision stock advanced 0.8% to 72.12 in late trading.
Microsoft is attempting to buy Activision, though antitrust regulators have challenged the deal.
EA Disappoints With Its Report
The Activision and Take-Two reports follow disappointing earnings news from rival Electronic Arts on Jan. 31. EA's December-quarter results missed Wall Street's estimates, as did its guidance.
EA earned an adjusted $3.17 a share, flat with a year earlier, on net bookings of $2.34 billion, down 9%, in its fiscal third quarter ended Dec. 31.
EA lowered its guidance for the current quarter because of a six-week delay for its "Star Wars Jedi: Survivor" game. Its guidance for fiscal 2024 also was below views. Plus, it announced a strategy shift for its mobile games. It is shutting down "Apex Legends Mobile" and canceling development of "Battlefield Mobile."
TTWO stock ranks ninth out of 22 stocks in IBD's Computer Software-Gaming industry group, according to IBD Stock Checkup. It has a poor IBD Composite Rating of 14 out of 99.
Meanwhile, Activision ranks fourth in the video game group and EA ranks fifth.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
