Stock of the day 14/05/2015 – Take-Two Interactive Software Inc/Urban Outfitters Inc

Next Monday sees two more American giants enter the earnings season fray, with Take-Two Interactive Software Inc and Urban Outfitters Inc both announcing their latest results.

Video game companies are quickly becoming this generation’s film studios, and Take-Two Interactive Software Inc is up there with the best of them; it announces its Q4 2015 earnings release on Monday. The video game publisher, developer and distributer owns one of the most recognisable, and profitable, company’s in the sector, Rockstar Games, who created, and continues to produce, the record-breaking Grant Theft Auto series. It also has its hand, to varying degrees, in more than a few other mega-selling franchises; Borderlands, Bioshock, Civilization and the WWE, NBA and MLB sports games all fall under the Take-Two banner.


(Source: IT-Finance.com 14/05/2015)

Last year saw the growth felt in the second half of 2012 and the whole of 2013 continue, starting 2014 at $17.32 before ending it at $28.03. Yet after reaching a peak of $30 towards the end of January in the run up to its third quarter results, things have begun to slip for Take-Two, hitting a yearly low of $23.31 at the end of April; the stock is currently trading at $24.76.

The post-holiday period games landscape can be a bit sparse on the releases front, and this is reflected In Take-Two’s output, which has been dominated by re-releases of old games. The much-clamoured for release of GTA V on PC and a PS4/Xbox One release for Borderlands 2 and Borderlands: The Pre-Sequel were big parts of Take-Two’s early year strategy, with the company’s main focus on the launch of its latest franchise, Evolve.

Sales of these games, especially GTA V and Evolve will be of significant interest to investors. The former’s release on the PS4 and Xbox One helped Take-Two reach 24.2% revenue growth year-on-year with a $0.17 increase in earnings per share to $1.87 back in its Q3 results in February. The latter, on the other hand, will be a test of Take-Two’s ability to create an original IP for the latest consoles. Analysts have given Take-Two a consensus rating of ‘hold’ with an average target price of $26.50.

Monday’s other big release will be a slightly more recognisable name to most as Urban Outfitters Inc reveals its Q1 2016 earnings results. Since its stock-damaging sales warning back in mid-October, Urban Outfitters has been slowly recovering its 2014 losses. The clothing company started 2015 at $34.35 and quickly saw a yearly low of $32.97 in the middle of January.


(Source: IT-Finance.com 14/05/2015)

However, in the build up to its fourth quarter results the company saw steady gains; once those results were announced Urban Outfitters leapt by around 13%, from $38.91 to $44.08. This culminated in a 2015 high of $48.90 by the end of March. Yet this high couldn’t be sustained and since then things have fallen off for the company, with Urban Outfitters currently trading at $40.25.

Despite its still relatively hip image Urban Outfitters has had the propensity to upset people of late, making misjudgements about clothing eerily similar to both Native American apparel and prison uniforms enforced on LGBT people by the Nazis. These issues have rumbled on into the start of 2015 and don’t help Urban Outfitters’ carefully constructed image, something the company is trying to combat in Europe by poaching Emma Wisden away from Topshop, where she was buying director, in order to head up the company’s European operation.

Impressive earnings per share growth last quarter saw Urban Outfitters post $0.60 per share compared to the $0.30 forecast, whilst its sales rose from $905.9 million to $1.01 billion year-on-year. Analysts have once again forecast EPS of $0.30 for Urban Outfitters, but with room for surprise like in the third quarter, whilst giving the company a consensus rating of ‘hold’ with an average target price of $43.55.