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LOS ANGELES (Reuters) – Video game maker Take-Two Interactive Inc (TTWO.O) on Thursday smashed Wall Street expectations for its fiscal third quarter and raised its forecast for the current fourth quarter, citing strong sales for its "Red Dead Redemption" title.
The company's shares rose 12.4 percent in after-hours trading.
The New York-based company raised its outlook for the fourth quarter and said it expects to be profitable for the full fiscal year, after previously forecasting a net loss.
"It's a hit or miss business and 'Red Dead Redemption' definitely played a big role in the turnaround," said Atul Bagga, an analyst with ThinkEquity LLC.
Take-Two Interactive confounded analysts who had expected the company to suffer without a game release tied to "Grand Theft Auto," its most popular franchise.
If the company can stay profitable this fiscal year, it will be the first time it has achieved an annual net profit without releasing a "Grand Theft Auto" game.
Strauss Zelnick, chairman of Take-Two Interactive, said the company must continue to release quality games.
"It's true of all entertainment businesses, as they begin to mature so called 'B' titles stop selling and even 'A-' titles stop selling and only 'A+' titles continue selling," he told Reuters in an interview.
"Red Dead Redemption" has sold 6.9 million units since its release in May. The franchise is about half as popular with gamers as its older cousin "Grand Theft Auto," Bagga said.
The company has not said when it will release the next "Grand Theft Auto" title.
"If they can again turn a profit in 2011 I think that will be a big boost for investor sentiment," Bagga said.
The company posted a net profit for the quarter ended July 31, of $5.9 million, or 7 cents per diluted share, compared with a net loss of $56.5 million, or 73 cents per share, in the year-ago period.
Excluding items, the company earned 28 cents per share, ahead of the average of analysts' estimates of a loss of 6 cents a share, according to Thomson Reuters I/B/E/S.
The company, best known for its top-selling "Grand Theft Auto" game franchise, posted net revenue of $354.1 million, more than triple its revenue of $94.9 million in the year-ago period.
For the fiscal fourth quarter ending on October 31, Take-Two forecast a profit, excluding items, of 20 cents to 30 cents a share. It raised its outlook from an earlier forecast of a fourth-quarter loss, excluding items, of 10 cents to 20 cents, citing continued strong sales of "Red Dead Redemption."
Analysts on average had expected a loss of 12 cents a share for the current quarter, according to Thomson Reuters I/B/E/S.
Shares of Take Two rose 12.4 percent in after-hours trading to $9.95 after closing 3.4 percent higher at $8.85 on Nasdaq.
(Reporting by Alex Dobuzinskis; Editing by Carol Bishopric)
