Summary: ON SALE
Score: 15/20
MOS: 99%
Share Price: $166
Sticker Price: $365,101
Take-Two Interactive is an American video game holding company headquartered in New York, NY. They were founded in 1993 and currently have over 5,000 employees.
Take-Two is known for video game series including Grand Theft Auto, BioShock, Borderlands, Civilization, Mafia, Max Payne, NBA 2K, and WWE 2K.
They were one of the first companies to include full motion video sequences with Hollywood actors and actresses. Some of the actors and actresses that were hired by Take-Two during the 1990’s included Dennis Hopper, Christopher Walken, and Karen Allen.
I did some homework on the Film Industry compared to the Video Game Industry.
In 2018, the global box office film industry was worth $41B. When combining the home entertainment revenue, the global film industry was $136B. Due to COVID-19, the 2020 global box office is down an estimated 66%. The movie industry is ripe for disruption and I believe premium rentals on digital streaming platforms like Disney+ and Amazon are the future. In other words, movie studios need to release films to these platforms at a higher rental price between $29.99 and $49.99 if they want to make their money back against production costs.
In 2018, the global video game industry was worth $134B and it’s growing at a rate of about 12% per year. Fortunately, COVID-19 hasn’t caused a negative impact on the video game industry. In fact, when 2020 annual financial reports are released in early 2021, we’ll probably learn that revenues grew by more than we expected.
The top three video game companies by revenue include:
- ATVI (Activision Blizzard) – 2019 Revenue = $6.4B
- EA (Electronic Arts) – 2019 Revenue = $5.5B
- TTWO (Take-Two Interactive) – 2019 Revenue = $3B
Here is a comparison to EA and ATVI within Tykr:
ATVI
OVERPRICED
Score: 9/20
MOS: -19%
Share Price: $81
Sticker Price: $67
EA
ON SALE
Score: 16/20
MOS: 68%
Share Price: $127
Sticker Price: $410
Although ATVI is not a wise investment at the moment, it’s worth keeping an eye on. The video game industry as a whole is looking very positive. Not only for entertainment but for education as well.
COVID-19 is causing a shift with our education system and we’re just in the beginning stages of change. What I would consider the “old way” of teaching where students sit in rows, face the front of the room, and get “taught at” is a thing of the past. It doesn’t work anymore. And it certainly doesn’t work over Zoom or Teams. In fact, students at all levels are stating they don’t feel engaged, are bored, and in some cases especially at the college and university level, are not getting their money’s worth. I value teachers but the approach needs to change. This is where video games come in.
Let me share a story from my childhood. This story may seem silly but there is a key takeaway.
I was born in the 80s and grew up in the 90s. I had video game systems like Sega Genesis and Game Boy but the system I gravitated to most was actually the PC. I found interest in some games but boredom with most games. (Yes, I was an odd kid). The type of game that I found to be a lot of fun and actually quite stimulating was RTS (Real Time Strategy). Games like Command & Conquer and Starcraft were, in my opinion, a cut above the rest.
I found, to be successful at real time strategy, you needed to understand the concept of passive income. If you can figure out how to generate passive income, you will be able to manufacture more supplies and tools to overcome your objectives. Overall, at the age of 12 I realized how important passive income is. In real life, businesses that have diversified passive streams of income typically thrive more than those with a single source of income. In your personal life, if you have passive income, you can typically travel more, spend more time with family, sleep more, and obviously retire early.
A video game taught me the most important financial lesson of my life. Our education system did not.
Our education system is ripe for disruption and video game companies are already taking action. This is the opportunity for students to learn real world skills in a way that is both educational and entertaining. For video game companies, this is their time to shine! I can’t wait to see what the next 10 years bring.
With TTWO, The score of 15/20 shows their financials are very strong and with a MOS of 99% (Share Price of $166 vs a Sticker Price of $365,101) this stock has a lot of upside potential!