Take-Two Interactive (NASDAQ: TTWO) stock has been trading at $157 per share, a significant 26% below its peak level of over $213 seen in February 2021. In contrast, Electronic Arts stock (NYSE: EA) saw a 9% decline over the same period. TTWO stock was trading at $123 in early June 2022, just before the Fed started increasing rates, and has since risen by 28%. However, this is lower than the 45% gain for the S&P 500 during the same period. A detailed analysis of Take-Two Interactive’s performance during turbulent market conditions in 2022 compared to the 2008 recession shows a mixed picture.
TTWO stock has seen a range of $130 to around $170 in the past 52 weeks, falling 1% year-to-date compared to the S&P500 index, which is up 15%. The delay in the release of the highly anticipated game – Grand Theft Auto 6, now expected in Fall 2025, is seen as one of the reasons for this underperformance. Returns for TTWO stock were -14% in 2021, -41% in 2022, and 55% in 2023, showing inconsistency in its performance compared to the S&P 500, which saw mixed returns over the same period.
Amid the current uncertain macroeconomic environment with high oil prices and elevated interest rates, the question arises whether TTWO could face underperformance compared to the S&P over the next 12 months or if it will see a recovery. From a valuation perspective, TTWO stock appears to have room for growth with analysts estimating an average price of $174, reflecting over 10% upside from its current levels of $157. This potential growth could be driven by factors such as market sentiments and the company’s financial performance.
The timeline of the 2022 inflation shock shows various macroeconomic events that have impacted market conditions, including high inflation rates and aggressive interest rate hikes by the Fed. While the market initially reacted negatively to these developments, there has been some recovery in the S&P 500 index. The Fed’s efforts to stabilize the economy and control inflation rates are expected to have a positive impact on market sentiments, potentially benefiting stocks like TTWO.
Comparing TTWO stock performance during the 2007/2008 crisis to the S&P 500 index, TTWO stock declined by 75% from its pre-crisis peak to the bottom in March 2009, but recovered by 62% by early 2010. The S&P 500 index saw a decline of 51% during the crisis, but also experienced a recovery afterward. Take-Two Interactive’s fundamentals and financial position have seen growth in revenue, mainly driven by acquisitions and successful gaming franchises. Despite a loss reported in fiscal 2024, the company’s financial position remains strong with manageable debt levels and cash reserves.
In conclusion, the potential upside for TTWO stock could be significant if it recovers to its pre-shock levels of $213, representing a 36% increase from its current price of $157. With the Fed’s efforts to stabilize the economy and market sentiments, there is a possibility for TTWO stock to reach levels over $200 in the future. However, based on current fundamentals and valuation metrics, the near-term upside may be limited. Investors should monitor market conditions and the company’s performance for potential investment opportunities.
