Tuesday's Headlines: Take-Two Shares Fall on Weak Guidance

Tuesday's Headlines: Take-Two Shares Fall on Weak Guidance

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Sea Limited (SE) +10.1%

2U (TWOU) +6.9%

Twilio (TWLO) +6.9%

Meta (META) +6.5%

Eventbrite (EB) +6.3%

Moving Down ⬇️

Redfin (RDFN) -9.7%

Lemonade (LMND) -8.1%

Evolent Health (EVH) -7.9%

The Trade Desk (TTD) -5.5%

Stitch Fix (SFIX) -5.2%

Here are the stories that you need to know ahead of market-open today, Tuesday the 8th of October.

Take-Two Shares Fall on Weak Guidance 🕹

Shares of Take-Two Interactive (TTWO) fell 15% in extended hours on Monday after the gaming company missed estimates and gave weak guidance for the coming quarter.

Revenue of $1.4 billion in the quarter was up 63% year-over-year, but failed to meet analyst estimates. The company recorded a loss per share of $1.52, which was also wide of the mark. Net bookings grew 53%, bolstered by recurring revenue that was generated by its recent acquisition of Zygna.

In the most worrying news, the company slashed its previous guidance for revenue for fiscal 2023. Management now expects revenue of between $5.4 billion and $5.5 billion. That’s far below previous guidance of $5.77 billion at the midpoint. The change in guidance has been put down to shifts in release dates as well as a fall in mobile gaming demand since the end of the pandemic.

“Our reduced forecast reflects shifts in our pipeline, fluctuations in FX (foreign exchange) rates, and a more cautious view of the current macroeconomic backdrop, particularly in mobile,” Take-Two CEO Strauss Zelnick said in a statement.

Take-Two Interactive is the maker of the hugely popular ‘Grand Theft Auto’ series. In September, a hacker posted part of the source code for the highly anticipated ‘Grand Theft Auto 6’. Shares of Take-Two Interactive are down 39% year-to-date.

Palantir Pays the Price for Poor Earnings 👁

Controversial software company Palantir saw its stock plummet yesterday following a minor earnings miss. The Colorado-based company — founded by Peter Thiel of PayPal fame — dropped by over 11% despite posting some enviable revenue figures for the quarter.

Palantir reported adjusted earnings per share (EPS) of $0.01 on revenue of $478 million, versus analyst estimates of $0.02 per share and $470 million respectively. While much of the focus is on this earnings miss, Palantir's revenue figure marks a 22% increase year-over-year, with commercial revenue in the U.S., in particular, driving a lot of this success through its growth of 53%.

This rapid growth may be explained by CEO Alex Karp’s comments:

“Large institutions in the United States have been far more willing to investigate the most significant sources of systemic dysfunction within their organizations.”

This suggests that other global areas may be hesitant to fully integrate with Palantir’s controversial data systems, with Karp mentioning that “countries in continental Europe have been less willing to introduce ‘software systems that challenge existing habits.’”

Despite this resistance from Europe, and yesterday’s sudden sell-off, Palantir still appears poised for further growth in the coming years. Its number of new customers purchasing software more than doubled in the last year, and it remains entrenched as the out-and-out leader in a niche that’s extremely difficult to break into due to the sheer enormity of the task of building out any similar type of platform.

Palantir is down over 62% year-to-date following yesterday’s drop, but this is largely a result of the widescale tech selloff that has dominated the year thus far.

Nvidia Offers Alternative Chip to Sidestep Chinese Sanctions 💻

Nvidia is the first of the major chipmakers to react to the Biden administration’s restrictions on semiconductor exports to China, producing an alternative chip that falls within the rules of what can be sold to the region. The alternative chip, dubbed the A800, will look to replace the A100 that was popular amongst Chinese tech giants like Alibaba and Tencent for AI applications.

The A800 has a reduced bandwidth — the ability to send and receive data — which falls within the restrictions set by the U.S. government. Nvidia claims it has the same computing power as the A100, yet can only send 400 gigabytes of data per second, compared to the A100’s 600.

The Biden administration’s decision to restrict exports to China is aimed at slowing the country’s military capabilities. The advanced chips in question are used in high-end technologies like supercomputing and AI.

Considering about a quarter of Nvidia’s revenue came from the region in 2021, the new restrictions have wreaked havoc on the business. The stock is down more than 50% year-to-date, with crypto-mining — another key source of GPU demand — also seeing a significant decline. However, it is not all doom and gloom for Nvidia investors, with the new chip expected to see high levels of demand, with shipments expected to start in the next few weeks.

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