Analyst: Take-Two buyout 'a reasonable bet'

24 May 2011 at 13:57:13 by John Robertson

Commercial and critical success of L.A. Noire sparks fresh acquisition speculation.

IncGamers reported last week that Take-Two's share price had risen 7.73% in one day as a result of positive critical feedback to L.A. Noire. Strong sales for the title followed, reaching number one in the UK and US and setting a sales record for new videogame IPs in the UK.

It's safe to say that L.A. Noire has joined the ranks AAA game, already populated by other Rockstar/Take-Two properties Grand Theft Auto and Red Dead Redemption.

The success of the new game has been followed by fresh talk of imminent takeovers from bigger publishers.

"Whether GTA V is released in late FY12 or a few months later, in early FY13, should not materially change the company’s intrinsic value," said Arvind Bhatia analyst Sterne Agee.

"Take Two investors know that the risk of game delays and the accompanying earnings volatility is inherent to their investment in this stock. What should be more important is that with the strong launch of LA Noire last week, Take-Two has created yet another valuable franchise.

"We think the company has now made a strong case for generating average annual EPS of $1.00 going forward ($1.35 ex the MLB contract that expires in 2012). With the GTA catalyst still ahead and the possibility of a takeout still a reasonable bet, we are reiterating our $19 price target which is based on our sum-of- the-parts valuation."

This is not the first time Take-Two have been at the centre of an acquisition circus, EA mounting a failed bid to buyout the publisher in 2008.

Our review of L.A. Noire can be found here.

Source: Industry Gamers

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