Once known primarily as the publisher of the Grand Theft Auto series of video games, Take-Two Interactive (NASDAQ: TTWO) is assembling a formidable portfolio of franchise properties. Next year, we’ll be adding Red Dead Redemption to that list.
A sequel to the 2010 original is scheduled to arrive in late 2017. When it does, investors can expect Take-Two’s Rockstar Games subsidiary to move 12 million copies during its first quarter on sale, says Macquarie Securities analyst Ben Schachter.
Fans with an extra $59.99 can pre-order a copy of the game now. Presuming that price holds steady through the initial release — which it could, especially if enthusiasm remains high — and that Schacter’s forecast is accurate, Red Dead Redemption 2 could be responsible for over $700 million in total retail sales for the quarter. For perspective, consider that GTA V passed $1 billion in retail sales just three days after release. The game is still selling well thanks to a web-based companion series called Grand Theft Auto Online.
For investors, it’s noteworthy that Take-Two seems intent on replicating the long-tail success of the latest Grand Theft Auto release with Red Dead Redemption 2. In its announcement of the game, Rockstar said paying players would also get access to “a brand new online multiplayer experience.” If Schacter is right — and given history, there’s no reason to believe he’s wrong — then Take-Two could have a ready-made, recurring revenue stream there for the taking when Red Dead 2 launches.
What would that be worth to the business? There’s no easy way to tell. For now, we know that analysts tracked by S&P Capital IQ are modeling for Take-Two Interactive’s revenue to grow 12.4% year-over-year and earnings before interest, taxes, depreciation, and amortization (EBITDA) to improve 8.5% over the same period. A strong showing for Red Dead Redemption 2 could end up making that forecast look meek.
Tim Beyers has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Take-Two Interactive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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