Why You Shouldn’t Be Buying TTWO Stock At $215?
The stock price of Take-Two Interactive Software (NASDAQ:TTWO) has gained 16% this year, outperforming the broader markets, with the S&P500 index down 4%. This outperformance can be primarily attributed to the company’s announcement of the Grand Theft Auto 6 launch later this year.
However, when examining the company’s financial performance, TTWO stock appears significantly overvalued at its current price of around $215. Our comprehensive analysis reveals several concerning factors that make the stock particularly unattractive given its elevated valuation.
We reached this conclusion by conducting a thorough comparison of TTWO’s current valuation against its operating performance in recent years and analyzing both its current and historical financial condition. Our assessment across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that the company demonstrates notable weaknesses in both operating performance and financial health, as detailed below.
The stock’s current premium valuation appears to rest almost entirely on a single factor: the anticipated launch of GTA 6. This upcoming release is expected to be the fastest-selling game of all time, which explains investors’ enthusiasm despite the company’s underlying financial concerns.
How Does Take-Two Interactive’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, TTWO stock looks expensive compared to the broader market.
• Take-Two Interactive Software has a price-to-sales (P/S) ratio of 6.8 vs. a figure of 3.2 for the S&P 500
How Have Take-Two Interactive’s Revenues Grown Over Recent Years?
Take-Two Interactive Software’s Revenues have seen some growth over recent years.
• Take-Two Interactive Software has seen its top line grow at an average rate of 18.1% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 1.0% from $5.4 Bil to $5.5 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues declined 0.5% to $1.4 Bil in the most recent quarter from $1.4 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Take-Two Interactive Software?
Take-Two Interactive Software’s profit margins are considerably worse than most companies in the Trefis coverage universe.
• Take-Two Interactive Software’s Operating Income over the last four quarters was $-968 Mil, which represents a very poor Operating Margin of -17.8% (vs. 13.0% for S&P 500)
• Take-Two Interactive Software’s Operating Cash Flow (OCF) over this period was $-333 Mil, pointing to a very poor OCF-to-Sales Ratio of -6.1% (vs. 15.7% for S&P 500)
Does Take-Two Interactive Look Financially Stable?
Take-Two Interactive Software’s balance sheet looks strong.
• Take-Two Interactive Software’s Debt figure was $4.1 Bil at the end of the most recent quarter, while its market capitalization is $38 Bil (as of 3/21/2025). This implies a strong Debt-to-Equity Ratio of 11.0% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $1.2 Bil of the $13 Bil in Total Assets for Take-Two Interactive Software. This yields a moderate Cash-to-Assets Ratio of 9.5% (vs. 14.8% for S&P 500)
How Resilient Is TTWO Stock During A Downturn?
TTWO stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on TTWO stock? Our dashboard How Low Can Take-Two Interactive Software Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.
Inflation Shock (2022)
• TTWO stock fell 48.6% from a high of $181.90 on 4 January 2022 to $93.57 on 8 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 18 November 2024
• Since then, the stock has increased to a high of $216.38 on 18 February 2025 and currently trades at around $215
COVID-19 Pandemic (2020)
• TTWO stock fell 16.1% from a high of $119.42 on 4 March 2020 to $100.15 on 22 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 April 2020
Global Financial Crisis (2008)
• TTWO stock fell 79.7% from a high of $27.65 on 5 June 2008 to $5.62 on 3 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 24 November 2014
Putting All The Pieces Together: What It Means For TTWO stock
In summary, Take-Two Interactive Software’s performance across the parameters detailed above are as follows:
• Growth: Strong
• Profitability: Extremely Weak
• Financial Stability: Strong
• Downturn Resilience: Weak
• Overall: Weak
Overall, we believe TTWO stock is overvalued, making it a bad pick at its current price. Despite our concerns, market sentiment remains positive due to the highly anticipated release of GTA 6 later this year. This title is projected to significantly boost the company’s revenue, potentially increasing sales by over 45% to $8.2 billion in the coming fiscal year. The game’s release will likely also help the company achieve profitability.
Nevertheless, we believe these positive catalysts have already been fully incorporated into the current stock price, leaving limited upside potential for new investors.
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