5 Things About Take Two Interactive Smart Investors Should Know

 

This is the very least that shareholders and potential investors should know.

Take-Two Interactive ( TTWO 2.66% ) has made significant strides in the gaming market. As a result, investors are starting to take note and looking to learn more about the gaming company that's home to the hit franchise Grand Theft Auto.

Those interested in Take-Two should know the following five things: Most of its revenue is recurring, it has produced several hit titles, it enjoys a vast market opportunity, gaming is becoming a spectator activity, and its profit margins are expanding. What follows is a more in-depth look into each.

Image source: Getty Images.

1. Majority of revenue is recurring

In 2018, the company hit an inflection point where most of its revenue came through recurring sources. In the fiscal year 2021, $2.3 billion of the company's total $3.55 billion in revenue was recurring.

Why is that important? Recurring revenue is stickier (more likely to continue). Compare that to non-recurring revenue, for instance, from sales of a new hit title. The company would need to produce another hit title the following year; otherwise, sales will likely decrease.

2. Several popular hit titles

The company is home to several popular hit titles, including Grand Theft Auto, Red Dead Redemption, NBA 2K, and Civilization. The repeated success in producing hits demonstrates skill and creativity. NBA 2K games have sold over 121 million units worldwide, and the Grand Theft Auto series has sold over 370 million units.

That can give investors confidence in its ability to continue producing hits consumers love to play.

3. A significant market opportunity

Gamers spent $233 billion in 2021 and are forecast to spend $286 billion by 2025. The massive and growing market is an enormous opportunity for Take-Two. The company's $3.5 billion in revenue in 2021 is impressive and highlights room for growth within the industry.

Innovations in technology enhancing gameplay on mobile phones, computers, and consoles are likely to fuel continued growth in the gamer economy. An estimated 2.8 billion gamers worldwide in 2021 indicates the industry can get them to spend more by delivering better quality over time.

NASDAQ: TTWO

Take-Two Interactive Software, Inc.

Today's Change

(2.66%) US$4.00

Current Price

US$154.50

KEY DATA POINTS

Market Cap

$17B

Day's Range

US$148.51 - US$154.54

52wk Range

US$133.54 - US$195.82

Volume

1,588,968

Avg Vol

2,106,322

P/E (ttm)

33.92

4. Spectator economy

Surprisingly, people are playing games and spending time watching others play. The global eSports audience rose to 495 million individuals in 2020. These hardcore fans watched 28 billion hours of gaming content through services like YouTube.

5. Expanding operating profit margin

Take-Two has grown revenue from $1.8 billion in 2017 to $3.4 billion in 2021. In that process, economies of scale have emerged, and the company's operating profit margin has expanded from 5.1% to 18.7%. In addition to economies of scale, there is another factor boosting profits. Gamers prefer to purchase digital copies of games instead of physical ones. Since they are typically priced the same, the move to digital saves the company the expense of creating and shipping physical copies.

While investors can learn many more things about Take-Two Interactive, the aforementioned should start you off on your due-diligence journey with a good foundation.

Is Vaxart the Next Moderna?

KEY POINTS

• Vaxart looks a lot like Moderna did during most of 2020.
• If its vaccine pill against coronavirus gets to the market, shareholders will hit it big.
• Moderna had a few tailwinds that Vaxart doesn't, but the reverse is also true.

 

The similarities are striking.

Vaxart ( VXRT -4.59% ) and Moderna ( MRNA -7.66% ) have a lot in common. Both companies are working on coronavirus vaccines, and both claim to have an advanced technology platform that'll enable them to open new frontiers in medicine and public health. 

Whereas Moderna's time in the spotlight has only just begun, Vaxart's time hasn't started yet -- assuming it ever does. And that means there might be an opportunity to profit by investing in it now. But what would its path to explode in value even look like? And could its market cap of $650 million ever grow enough to approach the size of Moderna's at $72 billion? Let's start by approaching the first question. 

Image source: Getty Images.

For biotechs, it's all about commercialization

As you may have heard, Moderna's approach to making medicines centers around messenger RNA (mRNA), a multi-functional biological molecule that encodes certain genetic information. 

Using that approach entails several important benefits, including quick pre-clinical development, the ability to rapidly update existing vaccines for new threats from viral variants, and flexible manufacturing processes. Likewise, mRNA medicines could eventually be used to treat a wide variety of conditions ranging from coronaviral infections to cancers. 

So the biotech's potential, addressable market is incredibly large. Moderna's sole product on the market now, Spikevax, brought in $18.5 billion last year, which isn't half bad, to say the least. Developing and commercializing Spikevax during the start of the pandemic sent its stock into the stratosphere.

NASDAQ: MRNA

Moderna, Inc.

Today's Change

(-7.66%) -US$13.76

Current Price

US$165.92

KEY DATA POINTS

Market Cap

$67B

Day's Range

US$163.03 - US$179.19

52wk Range

US$117.34 - US$497.49

Volume

8,292,801

Avg Vol

8,002,712

P/E (ttm)

5.48

Vaxart's approach is a bit different, so its potential success story can't look exactly the same as Moderna's. 

Though it is also developing a coronavirus vaccine, its candidate is only now entering its phase 2 clinical trials. What's more, Vaxart's vaccine isn't a jab like Moderna's but rather a pill. And whereas Moderna's future prospects are staked on the idea that mRNA medicines are broadly applicable, Vaxart's rest on its ability to use its technology platform to turn a bunch of different vaccines into pill form. 

The company's oral vaccine technology also has a few unique benefits. In particular, its pills appear to be able to generate immunity in the tissues of the mouth and nose. That means they might be more effective than the jabs on the market at actually preventing coronaviral infection, which initially occurs at those anatomical sites. Furthermore, the tablets are shelf-stable, require no staff to administer, and don't require clinical goods like gloves, bandages, swabs, needles, or syringes.

Plus, it's easier to convince someone to swallow a pill than it is to convince them to get poked in the arm, so the pill might be able to access some of the untapped vaccine market.

Of course, all that's still hypothetical. The company has no medicines approved for sale currently.

NASDAQ: VXRT

Vaxart, Inc.

Today's Change

(-4.59%) -US$0.24

Current Price

US$4.99

KEY DATA POINTS

Market Cap

$628M

Day's Range

US$4.99 - US$5.29

52wk Range

US$3.91 - US$11.11

Volume

1,899,527

Avg Vol

2,429,907

P/E (ttm)

For Vaxart to become the next Moderna, it'll need to prove that all of these potential benefits are real. The way to do that will be to successfully finish developing its coronavirus candidate and then proceed with commercialization. That would doubtlessly make its stock soar, if it actually happens.

And would that realistically result in something like Moderna's run-up of more than 843% over the last three years?

A long shot but worthwhile investment

In my view, Vaxart's stock won't be able to grow as much as Moderna's did even if it succeeds with commercializing its pill. 

First, the hype surrounding coronavirus vaccine stocks is long past, and there's no indications that it's going to return. As a result, the smaller biotech's stock will have a lot more trouble riding the waves upward as its project inches toward commercialization. 

Second, the scope of the company's ambitions is much smaller. It wants to be the vaccine pill company, which means that it won't be going into therapeutics without a major pivot. Thus, its total addressable market is by definition much smaller than Moderna's, thereby capping the upper boundaries of its maximum revenue at a much lower level.

Third, even if its pill is approved for sale, the business will face a much more contested market than Moderna did. Along with Pfizer and to a much lesser extent Johnson & Johnson, Moderna has cornered the U.S. coronavirus jab market. While Vaxart might indeed succeed with its goal of picking up some of the remaining unserved demand from jab-reluctant people, it'll likely struggle to get widespread adoption, and sales may be low.

Nonetheless, investors should keep in mind that Vaxart had less than $1 million in revenue over the past 12 months. Practically any increase would therefore amount to a massive amount of growth, which would likely be reflected in a sharply rising stock price. 

In closing, I wouldn't write this stock off or avoid buying it just because it isn't likely to be the next Moderna. People who invest in it now could still potentially see a parabolic gain. 

Just don't forget that it's a highly risky, pre-product biotech company if you do choose to buy it; a whiffed clinical trial would be devastating for its shares in the short term.