Take Two Interactive ($TTWO) - The Cone of Uncertainty Narrows
GTA Is The Most Valuable Entertainment Asset In History
Writing this on the back of the successive Take Two announcements regarding GTA 6’s official pre-order date and confirmation of a base $80 retail price. I had looked into TTWO in early Q2 on the basis of pessimism regarding the much-delayed release of GTA 6.
There was a much hyped pre-order date in May, buoyed by rumors of retailers already receiving copies of the game that came and went, the market moved on.
What I found was a divergence in the value of the asset and the credit the market was giving TTWO. On the one hand you had the successive disappointments in release delays, then the lingering effects of the AI Trade seeping into the gaming industry and sucking the oxygen out of the sector (See Sony, Nintendo, Konami etc). On the other hand, you have an asset whose last iteration did a mind-boggling number in terms of sales and spawned a completely new online game revenue stream that was by the developers’ own admittance, not expected.
We’re going to run it back again and now Rockstar will have learned exactly how to monetize their long-tail online product too.
Yet despite all of this, the stock is more or less flat on the year. Taking out the technical reasons (AI overcrowding, hatred of anything software), what is the market missing? Certainty. Namely the below:
The price point GTA 6 will sell at - Consensus was closer to $70, while it was clear to me that it would price at $80. Today Rockstar officially confirmed this, with special additions at $100+. This means blended ASPs will be $80+
Pre-order success - Many extrapolations will be made on the back of how successful GTA6 pre-orders do. But up until this point even the pre-order date wasn’t confirmed. We will finally started getting proper data now.
Will it release on time - The market still has some residual doubt about Rockstar sticking to their timeline. I also don’t buy this as TTWO’s CEO has started re-iterating the release date on investor calls and conferences. Confirming pre-order dates and prices further strengthens the idea that “its really happening”
I’m posting my original internal analysis below. I haven’t updated it at all (besides any sensitive points related to our portfolio), mainly out of laziness.
The main point here is that the cone of uncertainty has narrowed - we now know base prices, analysts can now model the range of potential sales performance in a much easier way. For those worried that $80 will lead to demand destruction, putting aside the fact that GTA Online is STILL active, keep in mind that $60 in 2013 (GTA 5’s price and release year) equates about $85 today with the impact of inflation. Adjusted for inflation. this isn’t much of a hike at all.
Thesis Overview
TTWO has underperformed through the year along with the rest of gaming due to AI ‘fears’, despite having IP that AI can’t replicate. GTA may be the most valuable entertainment franchise in the world (GTA V holds multiple Guinness World Records for 1 day, 1 week sales records)
GTA 6 is scheduled for release on November 19, 2026, after 18 months of delays and is the big catalyst for the stock, my research revolved around this one product, despite TTWO owning many franchises
The release is meant to fall on FY Q3 2027 – my work revolves around estimates of that quarter’s sales. How successful the launch is should set the cadence for TTWO’s FY27 results
The market still isn’t 100% convinced there won’t be further delays, as pre-orders haven’t opened yet
Consensus Views
My base assumption is that GTA 6 is released as planned. My numbers for GTA sales in Q3 2027 are 7% above consensus - Appendix 1
There is a large delta between consensus GTA 6 Q3 sales and total TTWO Bookings as only two Sell Side houses have numbers for GTA 6 Net Sales specifically whereas most Sell Side houses haven’t updated Total Bookings to reflect GTA 6
Due to the perceived uncertainty around this massive catalyst, Sell Side hasn’t been updating their numbers. Q3 27 sales estimates haven’t moved all year – Appendix 2
There is a timeline of catalysts pre-release that should lead to positive price action as the cone of uncertainty narrows
Confirmation of price point for the game
Pre-order data to confirm demand levels
Proper confirmation from distributers that the game is scheduled to be released on November 19
TTWO’s marketing campaign on the run up to release
TTWO’s depressed multiples combined with growing certainty around its release and likely consensus upgrades as visibility clears should lead to solid price appreciation – Appendix 3
GTA 6 Sales Forecast – FYQ3 27
My forecast is based on Installed Console Base x Expected Penetration Rate of Consoles x ASP – Appendix 4
Installed Console Base (PS5 + Xbox): 143.6m units
Sony reports cumulative hardware sales, assuming 2026 will grow 0% yoy
PS5 units have declined yoy since peaking in 2023, I believe GTA’s release will likely spur a wave of console buying, especially as it is around Christmas, meaning at least flat should be realistic/conservative
Microsoft no longer reports Xbox unit sales but VGChartz has a monthly tracker for console hardware sales – MSFT numbers based on that – Source
Sense check: Microsoft has consistently sold less Xboxs than Sony’s Playstation and admitted that they had lost the console war
Also assume GTA’s release will lead to a wave of console buying, and that yoy sales will be flat for 2026
TTWO has not confirmed if there will be a simultaneous release on PC. Historically this has not been the case but I assume the PC market adds an additional 40.5m buyers that aren’t included in the calculation
Based on TTWO’s historic revenue split between Consoles and PC (22% to PCs)
Together would equate to a buyer base of 184.1m
Expected 2 Week Penetration Rate: 17%
Based on historical data – GTA 5’s 2 Week Penetration Rate was 18% - Appendix 5
Once pre-orders for the game open, there should be more clarity on what this number could be
Implied FY Q3 27 Units sold: 46.5m by December 31, 2026
Two Week Units Sold (Nov 19 -> Dec 03): 24.4m
Implied Rest of December Units Sold: 22.1m
As holidays ramp, expect pace of sales to stay strong and for a similar number of sales to occur over the remaining 28 days in December
(24.4/31)*28
Morgan Stanley, BMO, BofA at 45m
ASP: $80
TTWO has not announced pricing but consensus is still assuming $60-$70, this is where the majority of my beat comes from
Consensus has not updated pricing despite TTWO CEO stating that they will price GTA 6 ‘according to the value it will give players’
Microsoft announcing that they will start pricing Xbox games at $80 - Source
There is no reason for Sony not to match pricing
An Italian store accidentally uploading a pre-order page on 18/05/26 at EUR 70 (Approx. $80) - Source
My ASP is conservative as it doesn’t take into account bundles/special editions which will sell for >$80 and raise blended ASP
Gross CY 2026 GTA 6 sales: $3,716m
46.5 units x $80 ASP
Net GTA VI Sales: $2,676m
After netting off platform fees, assumed fee of 28% (From Consensus)
Console platform fee is 30%, but blockbuster releases usually negotiate discounted rates
I am 7% over consensus – Appendix 1
To match consensus we would need to see at least $80 ASP and 16% 2 Week Penetration or $70 ASP and 19% 2 Week Penetration – Appendix 6
My GTA 6 forecast gets me to $4,075m in Total Bookings for Q3 27 (GTA 6’s release) vs Consensus $3,396m – Appendix 1
As stated in the Thesis Overview, this consensus # is outdated and ripe for upgrades
Compared to BMO, which are bullish and recently upgraded (18/5/26): $4,100m
Ex-GTA, my bookings numbers are based on consensus averages
Important to note, I haven’t factored GTA Online at all. We don’t know how TTWO will bundle online offerings and majority of revenues from GTA Online should occur in the future, post-launch
But will likely add a material mid-term tailwind