Red Dead Redemption 2 leads the charge in Take-Two’s unexpectedly successful third quarter

    
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Guns!

It’s been a good third quarter for publisher Take-Two, which posted $1.57 billion in net bookings, $1.248 billion in revenue, and $350 million in gross profit. The success is thanks in no small part to stellar sales of its rootin’-tootin’ outlaw-shootin’ sandbox Red Dead Redemption 2, which has sold a staggering 23 million copies since its October release, vastly exceeding the company’s expectations. On top of shipping more copies in its first 15 days than the original Red Dead did in eight years, the title also had “the highest opening weekend of any title in entertainment history of any sort,” according to Take-Two CEO Strauss Zelnick.

The game’s multiplayer component, Red Dead Online, has also been performing remarkably well, “trending ahead of how GTA Online was performing by the same point in its lifecycle.” The success of RDO also probably has something to do with the company’s “significant growth in digitally-delivered revenue,” where “recurrent consumer spending” — i.e., DLC and microtransaction sales — saw a 31% increase. In light of the successful quarter, the company now “expects revenue to range from $2.66 to $2.71 billion (up from expectations of $2.55 to $2.65 billion)” as well as “net bookings of $2.89 billion to $2.94 billion,” and “income is expected to range from $354 to $367 million.”

In addition, Zenick has also commented on the recent launch of the Epic Games Store, saying that he ultimately sees the platform as a potential boon for business: “From our point of view, we don’t see another retailer as a disruption,” he says, adding, “We want to be where the consumer is. We see competition on the retail side to be a good thing. It just means more distribution.” When asked if Take-Two might be formulating plans to launch its own distribution platform, however, Zenick said, “That’s not something that’s in our DNA. We make entertainment. We’re really not a retailer.”

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Natalyia

EA: “The single player campaign was the problem – we needed Battle Royale!”
TT: “We sold 23 million copies of what is largely a single-player game.”

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Armsbend

The stock went down 13% on the news lol. All of the institutional investors ran for the hills today. More to follow they can’t unload all of their shares at once. The CEO of TTWO did an interview on CNBC today where he couldn’t figure the price action either. Crazy day due to EA!

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Greaterdivinity

It’s why I hate the stock market.

“Oh, you made tons of money? Oh, you hit your forecasted profits/revenue targets? Well WE THINK YOU SHOULD HAVE RAISED THEM EVEN HIGHER! So despite your stellar success with strong profits, solid engagement, and proof that your games have a long monetization tale WE ARE GOING TO SELL YOU OFF ANYWAYS!”

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Armsbend

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Eliandal

All true, however there are other factors. Your stock market seems especially troubled of late, and RDR’s numbers have plummeted in the last 60 days.

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Schmidt.Capela

Forecasts (and hitting them) are very important because the share price already incorporates the expectations of investors before the quarterly report. So, if your company gives a too high forecast and misses it, shares are going to fall just after the quarterly report. Not to mention that having an unreliable forecast mean investors will trust it less, lowering the target share price due to uncertainty and risk.

The opposite isn’t much better either, because having a too low forecast not only means the share price — and thus the company valuation —stays depressed during the whole quarter, making getting money through loans or selling shares more difficult, but also results in the same unreliable forecast issues.

In other words, the share price is basically an instant snapshot of how much the market thinks the company will earn in the future based on information from the present, meaning it will fluctuate greatly whenever prediction and reality don’t match.

The only way to bypass this kind of potential issue is for the company to be privately held (i.e., its shares aren’t available on the market) and never have to borrow money, which is an unlikely proposition to say the least (though not unheard of; Valve, for example, is privately held, and I don’t think Gabe needs to borrow money very often).

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Armsbend

Really it is as simple as the price is whatever someone is willing to pay for it. All of the numbers are meaningless. It is the price one person is willing to sell it for versus what someone is willing to pay for it.