UBS analysts reiterated that Take-Two Interactive is their top U.S. gaming pick, with the highly anticipated release of Grand Theft Auto VI still scheduled for early November.
"We recently framed TTWO as our top pick in the U.S. interactive gaming space," analyst Christopher Schoell told clients.
Schoell said, "Concerns around AI and the potential for a new wave of content to hit the market/compete for engagement have weighed on the sector," adding, "We believe the fears for TTWO are overdone and expect new GTA VI announcements, trailers, and gameplay to drive sentiment, while industry consolidation highlights TTWO's potential strategic value as the remaining publicly traded U.S. AAA developer."
Schoell expects TTWO to guide to a record fiscal 2027, with $9 billion in bookings, including about $2 billion in GTA VI full-game sales.
Schoell and his team noted, "We build on our conviction that a strong GTA VI launch in the near term, coupled with expanding RCS and in-game monetization, will likely drive more stable long-term economic returns."
Here's that bullish framework:
Turning Hits into Recurring Cash Flows: In the mid-2010s with the launch and scaling of GTA Online and NBA 2K RCS, TTWO successfully evolved its CFROI (Cash Flow Return on Investment) profile from extreme volatility to high and stable economic returns. Strong historical execution supports our view of a successful mix shift to higher margin RCS revenues ahead and continued CFROI expansion.
How Big Could GTA VI Be? TTWO's CFROI Forecast vs Past Blockbusters: Leveraging the breadth of the HOLT framework, we compare TTWO's forecasted CFROI in the launch year to CFROI levels in other blockbuster game launches. Notably, we believe the launch of GTA VI will push CFROI to one of the highest levels we've seen compared to historical game launches.
Framing Long-Term Market Expectations: In HOLT's default valuation framework, TTWO has around 80% potential upside and market expectations appear muted vs forecasts. TTWO has earned a median CFROI level of 13% the last 10 years in conjunction with a high rate of reinvestment, and the GTA VI launch should increase CFROI to near all-time high levels. Despite this, long-term market expectations imply CFROI will fade to 9%, below its historical median. We see this as a relatively low bar to clear given a bookings mix shift to higher margin RCS revenue, likely supported by a steady cadence of content releases for the established GTA VI player base long-term.
Schoell offered clients his expectations ahead of earnings and guidance next Thursday:
As highlighted in our recent earnings preview, we expect TTWO's F4Q results to come in at the high-end of guidance (company reporting May 21). The main focus however will be the initial F27 outlook. We expect management to guide to a record year alongside GTA VI's release, where our prior survey work points to significant pent up demand and pricing power. Similar to precedent, we believe initial guidance could be conservative, setting up for a beat and raise narrative. This was the case for both GTA V (Fiscal 2014) and RDR II (Fiscal 2019), when the company outperformed its initial bookings outlook by several hundred million. We look for $9.0B of bookings in F27, incl. $2.0B of full game sales for GTA VI. Our est. assumes higher amort and S&M alongside GTA's release, albeit visibility into magnitude is limited and could drive variability to NT EPS (UBSe $6.16/$11.47 of Adj. EPS in F27/F28). We recently published an interactive model which allows investors to input their own unit/pricing assumptions for GTA VI and underlying PC/console/mobile growth.
Shares peaked in late 2025 at around $260 and have since tumbled to $190. Shares are currently clawing back some of those losses.
UBS maintains a Buy rating and a $300 price target, implying about 33% upside from Wednesday's levels.
Professional subscribers can read the full TTWO/GTA VI note here at our new Marketdesk.ai portal.