Investors are catching on to the video game sector, which already topped box office sales before the pandemic hit. The space is as popular as ever, and the latest generation of consoles are driving sales and new games.
Video games also hit that sweet spot of software where development costs are fixed, and exceeding sales expectations can lead to big profits. That’s great news for a number of companies, even if the market isn’t always ready to acknowledge that.
Case in point? Take Two Interactive (TTWO). The company reported better-than-expected earnings and revenues in the most recent quarter. However, the company’s forecasts for bookings weren’t quite as strong as expected, leading to a selloff.
Shares of the video game company are down over 15 percent from their 52-week high set back in February. Shares are now up only about 3 percent in the past year. That’s in spite of double-digit revenue growth and earnings growth up nearly 80 percent over the past year.
Action to take: Investors may like shares here, as the company continues to release new games and sell copies of existing ones. However, shares don’t pay a dividend.
Shares have been somewhat range-bound over the past few months, and are now near the lower end of their range. Traders might like the November $175 calls, last going for around $11.00, as a rebound play.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.