Take Two Interactive TTWO is set to acquire privately-held Playdots, the developer of the popular puzzle mobile game Two Dots, for $192 million.
The company will be paying $90 million in cash and the balance in newly-issued shares of Take Two common stock. The deal is expected to close in the third quarter of 2020.
Playdots’ three popular mobile games, namely Dots, Two Dots and Dots & Co. have been downloaded more than 100 million times. Moreover, its robust game pipeline will expand Take Two’s mobile portfolio in the long haul.
Expanding Portfolio Stokes Top-Line Growth
Take Two has been one of the top-performing video-gaming stocks on a year-to-date basis. Shares have returned 44.6%, outperforming the S&P 500 Index year to date.
The outperformance can be attributed to portfolio strength. The company’s first-quarter fiscal 2021 GAAP net revenues surged 53.8% year over year to $831.3 million.
Solid adoption and heightened user-engagement levels of games including Grand Theft Auto (GTA) Online and GTA V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile offerings, the WWE series, and The Outer Worlds drove top-line growth.
In fact, Take Two’s growth is primarily driven by GTA and Red Dead Redemption, its most popular franchises. Moreover, the company’s strong momentum is expected to continue due to increased consumer spending and active-user hours on video games, stemming from coronavirus-induced stay-at-home orders.
Additionally, the availability of Disintegration, a hybrid first-person shooter and real-time strategy game, is expected to further expand user base.
Further, upcoming releases such as Private Division’s Kerbal Space Program: Shared Horizons free update for console, 2K’s PGA Tour 2K21 and Mafia I for PS4, Xbox One and PC are expected to boost user engagement and bode well for the company’s prospects.
Moreover, Take Two’s acquisition of Barcelona-based free-to-play mobile-game developer Social Point is helping this Zacks Rank #3 (Hold) company fast penetrate the rapidly growing mobile-gaming market. Social Point continues to expand its gaming portfolio with the launch of Tasty Town and Word Life. It has a robust slate of new releases (10 games) for the remainder of 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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