Last night, the first trailer for the latest instalment of Grand Theft Auto VI from Rockstar Games studio saw the light of day. To illustrate the scale of this event in the world of video games, it suffices to mention that the previous instalment of the GTA series has sold a total of 190 million, which puts it in second place in terms of sales in history, just behind Minecraft (around 300 million). Due to the fact that the trailer was published after the close of the US stock market session, the stocks of Take-Two Interactive Software, owner of Rockstar Games, have not yet had time to react to the news. Nevertheless, it is worth considering what impact the latest instalment in the series may have on the value of the company and whether it is currently profitable to invest in Take-Two Interactive Software stocks?
Table of contents:
- How have AAA game developer stocks reacted to launch announcements?
- How much money will Take-Two Interactive make from the launch of GTA VI?
How have AAA game developer stocks reacted to launch announcements?
In line with the stock market saying 'buy the rumours, sell the facts', the trailer for the new instalment of GTA is likely to cause rises due to expectations of excellent sales for the game announced in 2025. Nevertheless, it will be interesting to see whether similar announcements of AAA titles have translated into noticeable increases in stock value in the past due to expectations of their release.
In the case of the announcement of Rockstar Games' previous game, publisher Take-Two Interactive's stocks rose just 10% from the first trailer to launch day, scoring a slide of more than 50% first.
Source: Tradingview, Take-Two Interactive, GTA V game announcement
Other major events in the games industry were the launches of The Witcher 3: Wild Gon and Cyberpunk 2077 by the CD Projekt Red studio. In this case, indeed, rising expectations contributed to the increase in the value of the company's stocks from the publication of the first official trailer of the game to its debut. In the case of the announcement of the third part of 'The Witcher', CD Projekt's stocks gained 185%, while the announcement of 'Cyberpunk 2077' saw an increase of 126%.
Source: Tradingview, CDProjekt, The Witcher 3: Wild Hunt game announcement
Source: Tradingview, CDProjekt, Cyberpunk 2077 game announcement
As we can see, it is not always the announcements of big titles that generate drastic increases in the value of their developers' stocks. Nevertheless, analysing the history of game development companies, one can see that their stocks more often tend to overestimate profits from upcoming launches than underestimate them. A prime example is CD Projekt, which was trading as high as PLN 450 on the day of the release of the game 'Cyberpunk 2077', and since the 2020 release the stocks have fallen to PLN 108, a 76% drop.
How much money will Take-Two Interactive make from the launch of GTA VI?
Take-Two Interactive has recorded almost uninterrupted revenue growth since the release of GTA V in 2013. Despite this, the net loss for the last four quarters was a record high, amounting to as much as -27.8% of revenue. This has led to a drastic drop in the company's cash - by 35%. This appears to have been an alternative to the company going into debt, which currently has little debt. The company's debt-to-equity ratio is only 0.32, which is average compared to its industry peers of 0.31.
The latest instalment of the cult game sold around 13 million copies on its debut day, which translated into revenue of USD 800 million. It is worth noting, however, that the entire budget for the production of that instalment was USD 256 million. If the latest production produced similar results, this would correspond to 14.9% of the revenue for the last 12 months. However, even if we treated this revenue at no cost it would not allow Take-Two to generate a net profit.
In addition, the declines in Take-Two Interactive's stocks in after-hours trading, which are already over 5%, are cause for concern.
Source: Conotoxia MT5, TakeTwo, Daily
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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