These two companies operate in the entertainment space, albeit in differing areas. These growth stocks offer a compelling opportunity for long-term growth and are a top buy today.
Take-Two Interactive (NASDAQ: TTWO) is a video game holding company that owns iconic franchises such as ‘Grand Theft Auto’, ‘Red Dead Redemption’, and more.
The company generated $903 million in revenue in Q3 of fiscal 2022, representing 5% growth, with over two-thirds of it digitally delivered. Hit titles such as ‘Grand Theft Auto Online’ continue to drive engagement years after the initial release. Furthermore, it has a robust multi-year pipeline of games which should drive future growth.
Take-Two is also expanding its mobile division with its acquisition of Zynga, which will allow it to tap into the mobile gaming market. This acquisition brings a portfolio of games and, in particular, mobile developers, which Take-Two can use to develop its existing intellectual property, which could be transformational for the business.
Its recent acquisition of Zynga could face antitrust issues, and the market is factoring this in with the stock price sitting below that of the agreed acquisition price. Although this is unlikely to derail the deal, it is a risk worth considering.
Its financials have also suffered from a rise in expenses, particularly related to its recent acquisitions, increased headcount, and more. This has impacted its bottom line considerably.
Despite being a self-proclaimed camera company Snap Inc. (NYSE: SNAP) is most well-known for its social media app Snapchat. Despite its stock being turbulent since its IPO in 2017, the company has shown some signs of strength in recent times.
Snapchat is used by a remarkable 75% of the Millennial and Gen Z population in the U.S. Regardless, it continues to grow its userbase with 319 million daily active users in Q4 2021, representing a growth of 20% year-over-year. It has sustained growth of 20% or more for five consecutive quarters, driven primarily by international users.
Snap Inc. reported a revenue increase of 42% in fiscal Q4 of 2021, reaching $1.3 billion, with the majority of revenue generated from advertising. It also reported its first quarterly profit as a public company with a net income of $24 million in the latest quarter.
Snap Inc. is also using the strength in its core business to invest in augmented reality (AR) and virtual reality (VR), which is a colossal opportunity. Its Snapchat filters are interacted with roughly 6 billion times per day and are the first step in achieving overlaying reality in the real world. This also has use cases for AR entertainment experiences such as shopping. It has also released Snap Spectacles which developers primarily use for taking videos.
However, the company has experienced headwinds in recent times after Apple’s IDFA changes. The company is also unlikely to be consistently profitable for some time which is a point to note. The company also faces tough competition from other social media players such as Meta Platforms, TikTok, and more.
Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.