Pachter: Take-Two Confidence Up, If Misguided

Ahead of Take-Two's Q3 results expected September 10th, Wedbush Morgan's Michael Pachter has said he expects in-line sales of $200 million and greater -- if misguided -- confidence in the publisher's future with Bioshock's performance and Manhunt 2 back on track. Though Pachter expects results close to consensus estimates of $201 million, lowered in August with the news of Grand Theft Auto IV's delay, he admits that sales might not be down so far as originally thought. "We note that NPD U.S. retail video game software sales data for the July quarter implies that Take-Two’s sales are down 11% compared with the prior year’s quarter, while our estimate is for revenue to decline 17%," he said, adding, "We think poor sales of several Q3 releases will require higher than expected reserve additions, pressuring margins and increasing losses." Pachter also predicts the company will raise its fiscal 2008 guidance on the performance of Bioshock and the ESRB clearance of Manhunt 2 for an M-rated release, leading to what he sees is somewhat misplaced investor confidence. "Shareholders remain confident in new management," he noted, "and the stock’s rebound over the last two weeks suggests to us that investors expected a rapid reversal of the company’s recent history of consistent quarterly losses." But, he concludes, "While the delay of GTA shook investor confidence for a brief time, recent price action suggests to us that this confidence has returned, albeit misguided in our view. The company’s FY:07 pro forma GAAP loss reinforces our belief that there are many ongoing problems that will take time to resolve."