Analysts, Options Traders Flock to Take-Two Stock After Earnings

Benchmark waxed optimistic on Take-Two's 'Red Dead Redemption 2'

Managing Editor
May 17, 2018 at 10:46 AM
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Take-Two Interactive Software, Inc. (NASDAQ:TTWO) stock is up 1.8% to trade at $115.05 this morning, erasing pre-market losses. The video-game company reported fiscal fourth-quarter earnings that surpassed expectations, although revenue missed estimates, due to underwhelming numbers from Take-Two's NBA 2K platform. The mixed earnings drew an equally mixed reaction from analysts. Three brokerages cut their price targets on TTWO stock, while three other analysts issued price-target hikes -- including to $135 at Benchmark, which said it sees "considerable near-term growth potential driven by Red Dead Redemption 2."

Take-Two stock is in the midst of its best month since January. Since trading south of the $93 level in early April, the equity has surged 24%. Overall, TTWO shares have gained 72% in the past 12 months, with their 60-week moving average containing a recent pullback.

In the options pits, TTWO call buying has been prevalent in recent months. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security's 50-day call/put volume ratio at 3.60, ranking in the 73rd percentile of its annual range. This suggests that calls have been bought over puts at a faster-than-usual clip during the past 10 weeks.

Shifting gears to today, options volume is running at a quick clip in early trading. Nearly 13,000 options have changed hands -- 12 times the average intraday volume and on track for a 52-week high. Puts are most popular, accounting for about 7,400 contracts. The June 110 put and May 115 put are most active so far.

Plus, the stock has consistently rewarded premium buyers over the past year. Specifically, its Schaeffer's Volatility Scorecard (SVS) reading is docked at an elevated 93 out of a possible 100, meaning TTWO has tended to make bigger moves over the last 12 months than what the options market was expecting.

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