We came across a bullish thesis on Take-Two Interactive Software, Inc. (NASDAQ:TTWO) on The Net Worth Club’s Substack by Danny Brody. In this article, we will summarize the bulls’ thesis on TTWO. Take-Two Interactive Software, Inc. (NASDAQ:TTWO)'s share was trading at $183.07 as of Jan 2^nd. TTWO’s forward P/E was 23.87 according to Yahoo Finance.

A computer technician working on a video game console with a gaming headset.

Take-Two Interactive (NASDAQ:TTWO), the company behind hit franchises like Grand Theft Auto, Red Dead Redemption, and NBA 2K, is positioning itself as a prime player in the gaming industry despite facing a recent net loss of $1.125 billion, largely attributed to write-downs and impairment charges. For fiscal 2024, Take-Two reported $5.35 billion in revenue, placing it among the industry's elite. While its profitability has been affected by one-time events, the recurring revenue from its core franchises offers a strong foundation for future growth. This resilience and the potential for a turnaround make TTWO an appealing investment, especially for those looking beyond short-term setbacks.

The gaming industry is experiencing significant consolidation, and TTWO stands out as an attractive acquisition target, especially as tech giants like Microsoft continue to strengthen their positions by acquiring major content providers. Amazon’s rumored interest in gaming via acquisition further underscores TTWO’s potential. With a market cap of $32 billion, Take-Two is still smaller than Activision Blizzard, which was acquired by Microsoft for $75 billion, making it an affordable target relative to its intrinsic value.

Take-Two's shift toward recurring revenue models, such as subscription services, in-game purchases, and free-to-play models, aligns with broader industry trends. The upcoming release of highly anticipated titles like Borderlands 4, Mafia: The Old Country, and Grand Theft Auto 6 is expected to drive significant revenue growth. The release of GTA 6, following the success of GTA 5, could generate more than $10 billion in revenue for Take-Two, cementing its position as a leader in the gaming industry. If TTWO were valued similarly to Activision, applying an 8.5x revenue multiple would push its valuation to $45.5 billion, or about $256 per share—substantially higher than its current market price.

With its strong intellectual property, expanding revenue models, and exciting pipeline, Take-Two is well-positioned for both short-term gains and long-term growth, making it an attractive investment opportunity in the evolving gaming landscape.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held TTWO at the end of the third quarter which was 48 in the previous quarter. While we acknowledge the risk and potential of TTWO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TTWO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.