The lack of visibility on the development of the Grand Theft Auto series is putting off investors to Take-Two and is a sign of bad communication from management.
That's according to Wedbush Morgan's Michael Pachter, who said that the board should communicate to its shareholders if the creation of the main console games is on development cycle of three and a half years or more.
"Dan Houser, one of the three key employees behind the franchise, said in a recent interview that the trio hadn’t even thought of the locale for the next instalment, let alone the plot. While we find this unfathomable, if it is true, it suggests that there will not be another instalment of GTA until late 2011 at the earliest, putting the game on a three and a half year release cycle," wrote Pachter in a note to investors.
"We think that the lack of visibility around the GTA franchise is an impediment to attracting investors to the Take-Two story, and reflects poorly on management.
"In our view, if the company’s most important franchise is on a three and a half year schedule, management owes its shareholders the obligation of informing them of this fact. With no visibility into the timing of the next instalment of GTA, we think that many investors will remain sceptical of the Take-Two story."
Last week Take-Two announced a delay to next year's Max Payne title, and dropped full-year revenue expectations to USD 950 million.
Take-Two sends out the message that it's a one-hit wonder, but Pachter pointed to a strong portfolio of titles – part of the problem, he added, lies with over ambitious development which leads to delays.
"With no profitability in sight, investors may again conclude that Take-Two is a 'one-hit wonder' with Grand Theft Auto and little else. We disagree, and think that the company has at least eight bona fide franchises, with the potential for 10 or 12.
"We perceive the problem to be an overly ambitious development schedule, with high expectations and high quality standards leading to inevitable delays. If Take-Two can deliver its franchises on a more compressed schedule, its earnings power would essentially double, and the stock would command a much higher price."