Turnaround Time for Take-Two Shares?

BioShock Infinite

The GTA and Bioshock game maker hit a new 12 month low today, is it comeback time?

Take-Two Interactive (NASDAQ:TTWO) shares sunk to $10.19 before recovering to close at $10.26.  If you are searching for the chance to invest in a given security at rock bottom, now could be the time for TTWO.

Take-Two hit a new 52-week low on June 13th and its shares haven't been below $10 since 2010.  Despite its recent success with Max Payne 3 it hasn't been enough to keep its stock from falling.  Take-Two is lucky enough to own Rockstar Games, the creative force behind Max Payne, Grand Theft Auto (GTA), Red Dead Revolver, and L.A. NoireMax Payne 2 was a weak game but Rockstar swung for the fences with Max Payne 3 and did everything right.  The gamble paid off as Max Payne 3 shipped close to 3 million copies in the first week and now its being released on PC.  The game has impressed the critics and fans of the original Max Payne.  Mastery expects sales of Max Payne 3 to remain steady but that's not why we are considering the beat-up game maker.

TTWO is a tough investment to make as its profit history is not consistent and last quarter they had a 19% decline in revenue to $148.1 million.  Bioshock Infinite is sure to be a success but that title won't be released until next year.  The company has been silent on the next iteration of GTA, could it be ready for 2014, sooner, later, never?  Nobody knows.

The future for Take-Two could be rich thanks to digital downloads, expansions packs for existing titles, and other cool products such as the Rockstar DLC Pass.  Take-Two should reduce its sales using traditional brick and motor fronts and going direct to the consumer via high speed internet downloads.  Take-Two makes more money that way. They don't have to pay to create physical copies of the game and let Wal-Mart (WMT) and others take a few bucks off the top.  Digital sales represented 13% of Take-Two's 2012 fiscal sales.  However in Q4 digital sales for Take-Two made up 19% of their total sales.  The future is streaming games and selling them directly to consumers.  Imagine how much profit Take-Two could generate if they had consistent titles releasing every quarter instead of waiting every other year for a blockbuster game.

MASTERY Bottom Line (Bolo Style)Bottom line: It seems obvious what Take-Two should be doing to get shareholders confidence. 

Should the stock get any cheaper, its worth a risk to wait for management to get it together.  Maybe Carl Icahn can work his magic and get a comeback to occur sooner.