Publisher Take Two Interactive has knocked $27 million off its sales guidance for the quarter ended January 31st as a result of a number of factors, but shares remain buoyant as key analysts indicate that the stock is still undervalued.
The company now expects to post earnings per share of 70 cents on revenues of $385 million for the first fiscal quarter, compared with its original projection of $1.10 EPS on revenues of $412 million.
The drop in the company's figures comes as a result of a number of problems - including the cancellation of two games in development, the delay to the launch of Mafia on consoles which has pushed the bulk of sales into the second quarter and the poor retail performance of key Christmas title Max Payne 2.
Take Two has also been forced to write off significant bad debt expenses after retailer KB Toys applied for bankruptcy protection, while changes to the company's accounting practices - currently being applied retrospectively to financial quarters all the way back to 1999 - will also impact the bottom line for the quarter.
Despite this, however, shares in the company actually rose in trading on the NASDAQ following the announcement. Key analysts believe that Take Two's stock remains undervalued compared to other companies in the sector, with the price having been artificially depressed by concerns over a long-running SEC investigation which is now reaching a resolution.
For the full 2005 fiscal year, which ends on October 31, the company has actually increased its forecasts - with net sales of $1.22 billion now expected, ahead of the previous estimate of $1.18 billion.