NEW BULLISH Plays
Take-Two Interactive - TTWO - close: 27.03 change: +0.61
Stop Loss: 25.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 18, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.6 million
New Positions: Yes, see below
Why We Like It:
TTWO is considered part of the technology sector. The company makes video games. They're probably best known for their Grand Theft Auto franchise, L.A. Noire, and Red Dead Redemption.
According to the corporate website, "Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe. The Company develops and publishes products through its two wholly-owned labels Rockstar Games and 2K. Our products are designed for console systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services."
If you read the Electronic Arts (EA) trade in the Premier Investor newsletter than you already know how big the video game market is and how fast it's growing. Unfortunately the earnings cycle for most video game companies has a lot of peaks and valleys. TTWO's latest earnings report on October 29th is a good example.
The company's Q3 2013 quarter was strong thanks to their record-breaking launch of the Grand Theft Auto V game. One year later revenues plunged -89% to $134.5 million in Q3 2014. That was still above Wall Street's estimate of only $111 million. TTWO said they lost $0.44 a share, which was 15 cents better than analyst expectations.
TTWO management then issued mixed guidance but most of it was bullish. The company expects their current quarter to see a profit in the $1.34-1.45 range compared to Wall Street's estimates of $1.20. Yet TTWO guided revenues below consensus estimates.
They also raised their 2015 guidance and expect profits in the $1.05-1.30 range compared to prior guidance in the $0.80-1.05 zone. TTWO also raised their revenue guidance but was less than Wall Street expected.
TTWO's results and guidance was good enough to spark a big rally in the stock. Likely due to the high amount of short interest. The most recent data listed short interest in TTWO at almost 20% of the 73.8 million share float. The fact that TTWO has not seen any correction following its post-earnings rally probably has bears in a panic.
TTWO has spent the last two weeks consolidating its gains in a sideways manner. Now it's breaking out from this trading range and hitting new 2014 highs. This move could spark more short covering.
Today's high was $27.19. I am suggesting a trigger to open bullish positions at $27.30.
Trigger @ $27.30
- Suggested Positions -
Buy TTWO stock @ $27.30
- (or for more adventurous traders, try this option) -
Buy the 2015 Jan $28 call (TTWO150117C28) current ask $0.95
Option Format: symbol-year-month-day-call-strike