U.S. stock markets rebounded sharply last week, with the Dow Jones up 1.35%, the S&P 500 rising 0.98% and the NASDAQ gaining 2.07%. The MSCI Emerging Markets Index jumped another 2.88%.
This week’s Bull Market Alert recommendation revisits Take-Two Interactive Software, Inc. (TTWO) — a pick that generated double-digit-percentage gains for you back in December.
Founded in 1993 and headquartered in New York, New York, Take-Two Interactive develops, publishes and markets some of the most popular video games on the planet.
Take-Two is behind popular games such as “Grand Theft Auto,” “Red Dead Redemption” and the “NBA 2K16” game franchise, all of which ranked among the top 10 video games sold this past Christmas season.
This success has translated into better-than-expected financial results.
On Nov. 2, Take-Two reported Q2 fiscal 2017 earnings of 45 cents per share, a whopping 15 cents ahead of the consensus estimate. Revenue soared 21.1% to $420.17 million, coming in at the high end of analysts’ estimates. The quarter was driven by strong sales of “NBA 2K16,” “Grand Theft Auto V,” “Grand Theft Auto Online,” “BioShock: The Collection” and “XCOM2.”
Also, in what may be the most bullish sign for the company long term, Take-Two is moving a big chunk of its business online, where it generates revenues on a recurring basis, rather than on a one-time model driven by game purchases.
Sure enough, this digital business grew 14% to $230.8 million last quarter, and 56% of this was recurring revenue.
Despite significant gains in the last year, analysts continue to be positive on Take-Two for 2017 because of big releases in the fall such as “Red Dead Redemption 2.” Mizuho Securities even made the company its #1 pick for 2017.
Take-Two will report financial results for Q3 of its fiscal year 2017, ended December 31, 2016, after the market’s close on Tuesday, February 7, 2017. Management now expects earnings of $2.00 to $2.25 per share. That would easily top Wall Street’s $1.71 per share estimates.
So buy Take-Two Interactive Software Inc. (TTWO) at market today, and place your stop at $48.00.
Options traders are also looking for Take-Two to surprise on the upside — recently purchasing more than 5,700 February $55 calls (TTWO170217C00055000), which last traded at $1.64 and expire on Feb. 17.
So if you want to take some additional risk, I am recommending that you join these same traders by buying these same options, which are a bet that Take-Two will soar beyond the $55 level in the next few weeks.
Big gainers in your Bull Market Alert portfolio this past week included Texas Capital Bancshares Inc. (TCBI), which rose 7.95%, and MKS Instruments, Inc. (MKSI), which moved 7.87% higher. Coherent, Inc. (COHR) also jumped 5.75%.
Raise your stop in Coherent Inc. (COHR) to $153.20 to lock in at least 10% gain.
Also, raise your stop in Texas Capital Bancshares Inc. (TCBI) to $82.35 also ensure your double-digit-percentage gain in this position.
Finally, close your long-time position in Avista (AVA) at a loss to make room for this week’s recommendation.
Nicholas A. Vardy