Many gamers and investors want to own a piece of Rockstar Games because the company makes and markets Grand Theft Auto, and Red Dead Redemption 2, both popular and fast-growing gaming franchises.
Parents are interested in buying Rockstar Games stock because they see how much time and money their kids spend on Grand Theft Auto and Red Dead Redemption 2.
Rockstar Games Stock
You can buy Rockstar Games stock by purchasing shares in Take-Two interactive. You cannot buy Rockstar Games stock directly because Rockstar is one of 17 individual companies that are wholly owned subsidiaries of Take-Two Interactive Software Inc.
Take-Two Interactive Software Inc., based in New York City, has 99 subsidiary companies incorporated in North America, Europe, and Asia.
Note: This is an unbiased research report. The author or Liberated Stock Trader is not affiliated, paid by, or owns stock in any of the companies mentioned in this report.
Rockstar Stock
You can buy stock in Rockstar, the makers of Grand Theft Auto, by buying TTWO shares. Grand Theft Auto V is one of the critically acclaimed and commercially successful video games of all time, with 145 million copies sold to date, according to the TTWO 2021 financial report.
Rockstar Games sold over 350 million Grand Theft Auto games between 1997 and August 2021, Game Developer estimates. Rockstar sold five million copies of Grand Theft Auto V between May and August 2022.
Who owns Rockstar Games?
Take Two Interactive Software Inc. (TTWO) is the current owner of Rockstar Games. TTWO is a leading games developer and publishing house that also owns 2K games.
Rockstar Games Stock Symbol (TTWO)
The stock ticker symbol for Rockstar Games, the publisher of Grand Theft Auto, is TTWO, representing Take Two Interactive Software Inc., commonly known as Take2Games. Take2 trades on the NASDAQ stock exchange as TTWO.
Take2Games is the parent company that owns Rockstar Games, 2K, Socialpoint, Ghost Story, Private Division, and other game publishers.
Rockstar Stock Price
Rockstar/Take-Two Interactive’s stock price has risen by 380% in the last 5 years. This values Take2 at $20 billion with a stock price of around $170.
According to Stock Rover, Take-Two Interactive is overvalued because its current Margin of Safety is -17%. The Margin of Safety is the calculation investors use to value a company based on its forward discounted cash flow. This means that investors may be overpaying for Rockstar stock.
Take2 Interactive can generate some cash. It reported a quarterly operating cash flow of $148.24 million and a quarterly ending cash flow of $2.157 billion on June 30, 2022
Take2 is generating less cash in 2021. The quarterly operating cash flow fell from $445.52 million, and the quarterly ending cash flow fell from $2.161 billion on June 30, 2020.
Take2 survived the first pandemic year without borrowing. Take2 reported six straight quarters of negative financing cash flow between March 31, 2020, and June 30, 2021.
However, the total debt rose slightly from $177 million on March 31, 2020, to $188 million on June 30, 2021. Take2 Interactive has a small amount of debt.
The cash and short-term investments grew during the pandemic. Take2 had $2.548 billion in cash and short-term investments on March 31, 2020. That number grew to $3.189 billion on June 30, 2021.
See the TTWO Stock Chart Live on TradingView
Take2 shows games can generate cash flow, but the cash always does not always indicate growth. I think one reason, Take2 is not growing is that it relies heavily on traditional console games, which are sold as standalone products.
That means Take2 is not generating much cash flow from Massive Multiplayer Online Games (MMOGs) like Blizzard Activision and Tencent Holdings. MMOGs, such as Fortnite and League of Legends, make money because thousands of people pay to play them each day.
The SocialPoint and Nordeus mobile games could make money from subscriptions, however. Rockstar Games and 2K can build MMOGs of popular games such as Red Dead and Grand Theft Auto.
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Take2 Games (Rockstar Stock)
Take2 Games has one of the most impressive games catalogs in the industry. Take2 Interactive is the eighth-largest gaming company in the world by revenue.
Take2 sold over 60 million copies of its Red Dead Redemption and 8 million copies of Red Dead Redemption 2 between October 2018 and August 2021. Take2’s 2k subsidiary claims to have sold 112 million units of its NBA 2K game.
2K publishes some high-profile games, including Marvel’s Midnight Suns, which stars the Marvel Superheroes. 2K has a partnership with Disney (DIS) subsidiary Marvel Entertainment to make superhero games.
2K also develops games for the National Basketball Association (NBA) and World Wrestling Entertainment (WWE). AllTopEverything claims NBA 2K21 was Take2’s most profitable game in 2020.
2K works with several respected game studios to develop games, including Visual Concepts, Firaxis Games, Hangar 13, Cat Daddy Games, 31st Union, and Cloud Chamber. Other 2K titles include Bioshock, Borderlands, Mafia, Sid Meier’s Civilization, and XCOM.
Take2 subsidiaries include mobile games publisher Socialpoint. Socialpoint’s library includes Dragon City, Monster Legends, and Tasty Town. On October 10, 2021, Socialpoint claimed its games had two million unique daily users. Socialpoint claims players have downloaded its games over 600 million times.
Another Take2 company is Private Division. Private Division publishes several popular titles, including Kerbal Space Program, Ancestors: The Humankind Odyssey, The Outer Worlds, Hades, and Disintegration. Private Division owns several game developers, including Moon Studios, Roll7, Panache Digital Games, and Squad.
Take2’s Ghost Story Games publishes BioShock. Another Take2 company, Dots, publishes Dots & Company and other mobile games.
Nordeus is a Take2 subsidiary in Belgrade, Serbia. Nordeus publishes mobile games that include the fantasy football (soccer) mobile game Top Eleven, the strategy game Heroic, and another football game they call Golden Boot.
Should You Invest in Rockstar/Take 2 Interactive?
Take2 will need to invest heavily in MMOGs and other subscription games if the company is to grow and survive. Subscription-based multiplayer platforms are the future of gaming.
Despite that, Take2’s value is growing. The total assets grew from $5.369 billion on June 30, 2020, to $6.314 billion on June 30, 2021. The problem is that the growth is not generating more revenue at Take2.
Take2 stock might be a poor investment because it pays no dividends, and the stock price has underperformed the S&P 500 by 29% in 2021, according to Stock Rover. Investors who want to make money need to seek alternatives to Take2.
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Today’s market provides many excellent alternatives to Take2 Interactive.
3 Alternative Investments to Rockstar/Take 2 Stock
1. Microsoft Corporation (NASDAQ: MSFT)
Microsoft is one of the largest gaming companies in the world’s biggest and most famous software company. Microsoft was the fourth-largest gaming company globally, with $11.6 billion in gaming revenues in 2020.
The popular Xbox game consoles make Microsoft a major player in gaming. Game Daily estimates that Xbox series sales grew by 16% to 1.35 million in the second quarter of 2021. Xbox was the third best-selling game console after Sony and Nintendo in the second quarter of 2021.
Statista estimates Microsoft sold 48.69 million Xbox One consoles between December 2017 and November 2020. Microsoft sold 85.8 million units of its earlier console, the Xbox 360, Statista estimates. They discontinued the Xbox 360 in 2017.
Microsoft is one of America’s most lucrative companies. It reported a quarterly gross profit of $32.161 billion and a quarterly operating income of $19.095 billion on June 30, 2021. Those numbers grew from $25.694 billion in quarterly gross profit and $13.407 billion in quarterly operating income on June 30, 2020.
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Microsoft’s quarterly revenues grew from $38.033 billion on June 30, 2020, to $46.152 billion on June 30, 2021. According to Stock Rover, Microsoft’s revenues grew by 21.35% in the quarter ending June 30, 2021. Microsoft is a pandemic-proof company. It experienced six quarters of double-digit revenue growth between March 31, 2020, and June 30, 2021.
Microsoft is considered a value investment and a growth stock because it generates enormous amounts of cash. According to Stock Rover, the company reported a quarterly operating cash flow of $22.710 billion on June 30, 2021. The quarterly operating cash flow rose from $18.673 billion on June 30, 2020.
The quarterly ending cash flow is smaller, however. Microsoft reported a quarterly ending cash flow of $522 million on June 30, 2021. The quarterly ending cash flow is low because Microsoft has paid enormous amounts of debts. Microsoft reported a quarterly financing flow of -$11.371 billion on June 30, 2021.
Microsoft’s debt level is stable. It reported total debt of $82.278 billion on June 30, 2021. The total debt grew slightly from $82.11 billion on June 30, 2020.
Microsoft has an enormous amount of cash. It had $130.334 billion in cash and short-term investments on June 30, 2021. The cash and short-term investments fell from $136.527 billion on June 30, 2020.
The value at Microsoft is growing. The total assets grew from $301.311 billion on June 30, 2020, to $333.779 billion on June 30, 2021.
Microsoft is a cash-rich value investment with a high rate of growth. The growth extends to the stock. Microsoft’s stock price grew from $221.40 on October 12, 2020, to $296.20 on October 11, 2021.
I think the enormous amount of cash and the high revenue growth at Microsoft justifies the stock price. The company is growing and generating cash.
There is an excellent dividend at Microsoft (MSFT). Microsoft paid a 56₵ quarterly dividend on August 18, 2021. The quarterly dividend will grow to 62₵ on November 17, 2021. They have scheduled two 62₵ Microsoft quarterly dividends in 2021.
According to Stock Rover, Microsoft shares offered a $2.48 forward annual dividend and 0.84% forward dividend yield on October 11, 2021. Stock Rover estimates Microsoft’s forward payment ratio will grow at a rate of 31.2% in the next few months.
Suppose you want a cash-rich stock that pays a dividend but offers a high margin of safety. I think you need to investigate Microsoft. I consider Microsoft the safest gaming stock and the best dividend stock in gaming.
2. Activision Blizzard Inc. (NASDAQ: ATVI)
Activision Blizzard is Take2’s biggest direct American competitor. I think Activision Blizzard is an excellent alternative to Take2 because it is cheaper and pays a dividend.
Investors paid $75.37 for Activision Blizzard shares on October 12, 2022. According to Stock Rover, ATVI is currently overpriced as it has a margin of Safety of +25%.
ATVI paid a 47₵ annual dividend on April 14, 2021. The Activision dividend will grow to 52.5₵ on May 6, 2022. Dividend.com estimates that ATVI shares offered a 47₵ forward dividend and a 0.62% forward dividend yield.
Acitvision Blizard Inc. is a game holding company similar to Take2. Like Take2, Activision owns several legendary games franchises. Activision Blizzard’s library titles include World of Warcraft, Call of Duty, Candy Crush, and Overwatch. Activision Blizzard owns some iconic game characters, including Crash Bandicoot.
View the Activision Blizzard Stock Chart Live on TradingView
Unlike Take2, Activision Blizzard is a major player in the massive multiplayer online games (MMOG) market. One of Activision’s most valuable properties is the most famous MMOG World of Warcraft.
Inven Global estimates that World of Warcraft had 26 million players in the second quarter of 2021. World of Warcraft is shrinking; its player base fell from 46 million in the second quarter of 2017.
MMO Populations estimates that World of Warcraft is the largest MMOG with 116.79 million total players. World of Warcraft had 1.109 million daily players on October 12, 2021, MMO Populations estimates.
Another Activision MMOG, Overwatch, had 198,448 players on October 12, 2021, Activeplayer estimates. Overwatch had 7.154 million average monthly players in the 30 days ending on October 12, 2021.
The value of MMOGs, such as Overwatch and World of Warcraft, is that people make regular payments for loot boxes or subscriptions to play them. Activision was charging $4.99 for Overwatch loot boxes on October 12, 2021. Each Overwatch player must pay $4.99 to remain competitive. Meanwhile, PC players pay $14.99 for Overwatch subscriptions.
Activision MMOG’s generate float from subscriptions and loot boxes. Float is a regular stream of cash that a company can tap for expansion or borrowing money. Warren Buffett famously used float from insurance premiums and newspaper subscriptions to build Berkshire Hathaway (NYSE: BRK.B).
Financial data shows Activision can generate float from MMOGs. It reported a quarterly gross profit of $1.741 billion, a quarterly operating income of $959 million, and quarterly revenues of $2.296 billion on June 30, 2021. There was also a quarterly operating cash flow of $388 million on June 30, 2021.
The Total Assets grew from $20.22 billion on June 30, 2020, to $23.572 billion on June 2021. Activision Blizzard is a growing company that is accumulating more debt. The Total Debt grew from $2.676 billion on June 30, 2020, to $3.606 billion on June 30, 2021.
I consider Activision Blizzard the best pure video game alternative to Take2. Activision generates enormous amounts of cash, grows, and pays a dividend. I think Activision is the better stock because it offers a high margin of safety and growth.
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3. Sony Group Corp (NYSE: SONY)
Sony is the largest gaming company on Earth, with $25 billion in gaming revenue in 2020. Sony manufactures and markets the world’s most popular next-gen video game console: the PlayStation 5.
Sony trades on the New York Stock Exchange as SONY, although the company is based in Tokyo. Sony’s American deposit slips trade on the NSYE as SNE. I think Mr. Market paid $109.13 for Sony shares on October 12, 2021.
Sony makes enormous amounts of money. It reported a quarterly gross profit of $6.815 billion, a quarterly operating income of $2.548 billion, and quarterly revenues of $20.407 billion on June 30, 2021.
View the Activision Blizzard Stock Chart Live on TradingView
There is growth at Sony. The company’s revenues grew by 11.68% in the quarter ending on June 30, 2021, 24.76% in the quarter ending on March 31, 2021, and 15.44% in the quarter ending on December 31, 2020.
Sony can generate enormous amounts of cash. It reported a quarterly ending cash flow of $15.599 billion on June 30, 2021. The quarterly ending cash flow grew from $3.248 billion on March 31, 2021, and $13.473 billion on June 30, 2020.
The quarterly operating cash flow fell from $2.698 billion on March 31, 2021, to -$3.9 billion on June 30, 2021. The quarterly operating cash flow fell from $4.675 billion on December 31, 2020, and $4.229 billion on September 30, 2020.
Sony is paying off enormous amounts of debt. It reported quarterly financing cash flows of $4.224 billion in the quarter ending on December 31, 2020, $3.28 billion in the quarter ending on September 30, 2020, and $2.694 billion in the quarter ending on June 30, 2020. The quarterly financing cash flow fell to -$609.82 million on June 30, 2021.
Sony finished the first pandemic year with less cash and more debt. The cash and short-term investments fell from $32.989 billion on June 30, 2020, to $19.134 billion on June 30, 2021. The total debt rose from $18.905 billion on June 30, 2020, to $15.520 billion on June 30, 2021.
Sony has more value. The total assets grew from $219.267 billion on June 30, 2020, to $255.617 billion on June 30, 2021. Sony has growing value.
Sony’s American deposit ships paid a biannual dividend of 23.9₵ dividend on June 12, 2021. Sony will pay another 23.9₵ dividend on December 8, 2021. That dividend will grow to 27.9₵ on June 8, 2022, and December 12, 2021. Stock Rover confirms that Sony offered a 0.44% forward dividend yield and a 48₵ forward dividend yield on October 12, 2021.
Sony is an excellent alternative to Take2 because it pays dividends and has a lower price. Sony has some value characteristics, including enormous amounts of cash and a growing price.
Summary
The market offers excellent alternatives to Take2 Interactive for those who want value investments in games. I do not consider Take2 a value investment in gaming, but I think Sony, Microsoft, and Activision Blizzard are good investments in gaming.
