GTA 6 Is Coming, So Why Is Take-Two Stock Down?

GTA 6 is set to launch this November, and the hype is off the charts. It's expected to sell millions of copies and break records. But if you own Take-Two stock, you might be scratching your head. The share price has slid about 15% this year and is down a similar amount over the past year. So what's going on?

First, let's zoom out. Over the past five years, Take-Two stock is up 39%. That's less than the S&P 500's 73% gain, but still solid. And if you go back further, the gains are massive. After Strauss Zelnick's hostile takeover in 2007, shares were around $20. Today, they're around $215. When GTA 5 launched in 2013, the stock was about $18. So clearly, long-term investors have done well.

So why the recent slump? One big factor: in January, Google announced its AI-powered Genie technology, which it said could build games. Investors freaked out, fearing competition for giants like Take-Two. The stock was at a 52-week high of $265 before that announcement, and it hasn't recovered since. Rhys Elliott of Alinea Analytics told GameSpot, "The stock market largely has no bloody idea what's going on with games." He added that the market doesn't grasp the gravity of a GTA launch, and negative reactions are more about headlines regarding leaks and rumors.

Another issue is Take-Two's high price-to-earnings ratio. Elliott said it's "very high." A high P/E suggests investors expect big growth, but it also brings 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.

Even the massive GTA 6 hype isn't juicing the stock. The game reportedly sold over 5 million preorders, generating more than half a billion dollars. By launch, it could hit 25 million preorders, bringing in $2 billion and covering its entire development budget. Rockstar's "Extended Look" trailer with Netflix in August was a hit, even causing console orders to surge. Yet since that event, Take-Two's stock has only declined further.

So what gives? The stock market can be fickle. As Jeff Bezos famously said when Amazon's stock was tanking, "The stock is not the company and the company is not the stock." Amazon's stock eventually recovered and then some. Elliott also noted that the many GTA 6 leaks, reportedly from a security breach, "rattled a lot of investors." Investors don't like seeing a company lose control over a valuable product. Take-Two is still trying to find those responsible for the leaks, and the game also suffered a major breach in 2022.

Big banks generally agree that Take-Two is oversold, with many analysts issuing "Buy" ratings and lofty price targets. So while the stock may be down now, the long-term picture could be very different. What do you think? Will you be picking up GTA 6 this November?