BMO Capital Markets is less optimistic about Take-Two Interactive Software (ticker: TTWO) stock due to concerns about the future profitability of its hit game Red Dead Redemption 2.
The firm’s analyst Gerrick Johnson lowered his rating for the game publisher’s shares to Underperform from Market Perform, saying Take-Two could have a harder time cashing in on its titles.
The “buzz around this once highly anticipated game [Red Dead Redemption 2] has dissipated markedly. We are concerned that engagement in the game could lapse and its ability to monetize to desired levels could come under pressure,” he wrote on Tuesday.
Take-Two stock was down 5.7% to $88.08 on Tuesday morning. Johnson lowered his price target to $80 from $119.
Last week, Take-Two stock fell 14% after the game publisher gave guidance for the current quarter that was lower than Wall Street expected. Take-Two also said world-wide shipments of Red Dead Redemption 2 had reached more than 23 million units.
Johnson cited lower numbers of people watching others play Red Dead Redemption 2, compared to the top titles, on the live-streaming site Twitch over the past week. The analyst also noted that investors are becoming less upbeat about the videogame sector due the trend toward free-to-play games such as Fortnite.
“Videogame stocks have been under pressure since last fall, as lackluster results have caught up with high valuations,” he wrote. “We expect this pressure to continue, and Take-Two should not be immune.”
Take-Two didn’t immediately respond to a request for comment.
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Source:: Daily times