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GTA 6 Is Going To Be Huge. So Why Is Take-Two’s Stock Having Such A Bad Year?
Take-Two owns one of the largest entertainment franchises out there in Grand Theft Auto. The newest entry, GTA 6, launches this November. There is enormous hype for the new game, which is expected to sell millions of copies at launch and break records. In short, it's expected to be a once-in-a-decade (if not ever) kind of title. The game is also coming to market with a lot of positive sentiment and excitement. If you're a Take-Two shareholder, however, the past year has been a big bummer. Take-Two's share price has slid about 15% so far this year and is down about the same over the past year, meaning anyone who invested in the past year has lost money (at least on paper; gains or losses are not realized until positions are sold) in the run-up to GTA 6's release in November.
What's going on here? There are plenty of factors involved in what could be driving Take-Two's stock price down, and plenty of reasons that this could ultimately just be a short-term blip.
First, it's important to zoom out. In the past five years, Take-Two's stock price is up 39%. That is short of the growth of the S&P 500 (+73% over the past five years), but it's still very solid for a single stock in a competitive field.
Going back even further shows even greater gains for anyone who bought and held Take-Two. For example, after Strauss Zelnick and his team at ZelnickMedia successfully completed a hostile takeover of Take-Two in 2007, the stock exploded in price. Take-Two shares were trading at around $20 back then. Today, Take-Two trades at around $215. When GTA 5 launched in 2013, Take-Two was trading at about $18. Clearly, the stock did gangbusters since then, continuing to surge over the years as Take-Two expanded its portfolio to include numerous other heavy hitters while increasing profitability with microtransactions and recurring revenue.
Take-Two, along with other game companies like Roblox, got hammered in January this year when Google announced its new AI-powered vibe-coding Genie technology, which the company said was capable of building games. Investors freaked out, thinking, or hedging, that an offering like Genie might be able to make competitors or contribute to an environment that eats away at the market share of heavyweight incumbents like Take-Two. Experts said that thesis was obviously wrong, but the market spoke, and Take-Two saw billions in market cap wiped out. Prior to the Genie announcement, Take-Two was trading at a 52-week high of $265, and the company has not recovered since then, at least in terms of its share price.
Rhys Elliott of Alinea Analytics told GameSpot, "The stock market largely has no bloody idea what's going on with games."
"It's fickle and reactive, so trying to reverse-engineer its logic on this stuff rarely works out," he said. "The stock market doesn't really grasp the gravity of a GTA launch, including the cultural weight, the install base, and the years of guaranteed revenue that follow. The negative stock reaction is more to do with headlines about leaks and rumours."
Something else that's playing a role in Take-Two's stock price is the price-to-earnings multiple, or P/E ratio, which Elliott said is "very high." A P/E ratio is determined by the formula of the stock price divided by earnings per share. Having a high P/E ratio suggests investors see significant growth ahead, but with that also comes greater volatility.
"When a stock is that richly valued, even minor negative news can trigger a pullback, even if consumer demand hasn't actually changed," Elliott explained.
GTA 6 is expected to be an enormous, monumental success. It's reportedly already sold 5+ million copies through preorders, generating more than half a billion dollars. By launch, the game could reach 25 million preorders, bringing in $2 billion in revenue and paying for the game's entire development budget. These are positive signs that sound like they would resonate with investors.
Rockstar finally lifted the veil on GTA 6 in the mo