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"Borderlands 3" and "Outer Worlds" Will Help Take-Two Interactive Beat Expectations

When most people think of Take-Two Interactive (NASDAQ: TTWO), franchises like Grand Theft Auto, NBA 2K, and Red Dead Redemption are probably the first names that spring to mind. These properties remain the video game publisher's biggest performance drivers, but it's also true that investors are already factoring those series' expected revenues into their value equations.

By contrast, the company's recent releases like Borderlands 3 and The Outer Worlds are less known among the investing community. But they're putting up strong sales and will play important roles in powering this tech stock's performance over the next year.

Image source: Take-Two Interactive.

Borderlands 3 brings home the bacon

Borderlands 3 launched on Sept. 13, and it delivered a best-ever debut for the franchise. It also came in as the second-best-selling game in North America for the month -- trailing only Take-Two's own NBA 2K20. That put the collaboration with developer Gearbox ahead of Electronic Arts' big September soccer release, FIFA 20 -- a notable achievement.

Borderlands 3 shipped 5 million units in its first five days on sale, and Take-Two announced during its second-quarter conference call on Nov. 7 that the title had shipped nearly 7 million units. The game could have likely sold even more had the company not opted to make the digital version of the game exclusive to the Epic Games Store on the PC platform.

On the other hand, the publisher probably received a very favorable deal from Epic for that exclusivity, because the platform is still new and the company's working hard to attract users to it. Borderlands 3 is Epic Games Store's biggest exclusive to date, and the game seems to be putting up strong sales on the platform. And even with that restriction on its sales, Borderlands 3 became the fastest-selling title in the history of Take-Two's 2K publishing wing.

The strong launch sets the game up to be a long-term revenue generator through the sale of in-game items and the release of additional content packs. It's also likely that Borderlands 3 will eventually make the jump to Sony's PlayStation 5 and Microsoft's next-generation Xbox platform, which are both due to launch next holiday season. Bridging the game to new consoles with updated graphics and some added content would give Gearbox and Take-Two the opportunity to sell another version of the game to players who have already purchased it for current platforms, as well as to reach new players -- a strategy that proved quite successful with Grand Theft Auto V.

Image source: Obsidian.

The Outer Worlds is a surprise hit

The Outer Worlds launched on Oct. 25, so it didn't contribute anything to Take-Two's second-quarter results, but during its recent earnings call, the publisher confirmed that the game is exceeding expectations. Its has been a hit with critics and customers alike, earning average scores of 86 from critics and 83 from users on the review aggregating site Metacritic (using a grading scale of 0-100).

The title never got a whole lot of hype or coverage starting from its reveal last December to its release late last month, so the fact that it's now managing to generate significant organic buzz is notable. U.S. sales data for the title hasn't been made available yet, but it debuted as the No. 4 best-selling title in the U.K. and came in as the No. 5 for its second week at retail. It also came in at No. 5 for its first week and No. 10 for its second week on the Europe, Middle East, Asia, and Africa (EMEAA) chart.

The single-player nature of the game and the smaller installed base means that it will likely present a smaller opportunity for ongoing monetization through microtransactions than Borderlands 3. However, it's also true that single-player role-playing games have a dedicated audience. Because it is significantly differentiated from other, multiplayer-focused titles, and has quickly won high regard in the gamer community, the title could have some longevity. The Outer Worlds is also scheduled to launch on Nintendo's Switch console early next year, which should help it rack up some extra sales as well.

Take-Two's franchise catalog looks strong

Contributions from Borderlands 3 and The Outer Worlds might not mean a whole lot in the holistic sense if Take-Two's main franchises weren't in a healthy state. The outlook is generally encouraging on that front.

The company's WWE 2K wrestling game series has been losing steam, and this year's entry has had a troubled debut that was marred by a variety of bugs and overall quality issues. It will have to deliver a better product next time around if it wants to get the franchise back on track. Thankfully, Grand Theft Auto, NBA 2K, and Red Dead Redemption all look to be putting up strong performances, and the company is scoring significant hits with other properties.

Take-Two is successfully building out its catalog, with Borderlands 3 solidifying the franchise as a triple-A series with staying power and The Outer Worlds emerging as an unexpected winner. These recent victories, combined with increased development for mobile platforms and franchises like Bioshock that will likely get new installments in the not-too-distant future, have the company looking unusually strong outside of its core franchises.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan owns shares of Take-Two Interactive. The Motley Fool owns shares of and recommends Microsoft and Take-Two Interactive. The Motley Fool recommends Electronic Arts and Nintendo and recommends the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.


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