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Take-Two Interactive Software’s Games Show Staying Power; Q3 Beats

Video game publisher Take-Two Interactive Software ( TTWO ) late Wednesday trounced Wall Street’s targets for the December quarter, despite not having launched any big new games during the holiday shopping season. The New York-based company earned 89 cents a share excluding items on sales of $486.8 million in its fiscal third quarter, ended Dec. 31 . Analysts polled by Thomson Reuters had expected Take-Two to earn 50 cents a share ex items on sales of $452.8 million. On a year-over-year basis, earnings per share fell 67%, and sales fell 31%. Take-Two credited the sustained popularity of such games as “Grand Theft Auto 5,” “Grand Theft Auto Online,” “NBA 2K16,” “WWE 2K16” and the “Borderlands” series for its fiscal Q3 upside. Take-Two stock was up more than 4%, near 34, in afternoon trading on the stock market today . The stock hit an all-time high of 37 on Nov. 6. Take-Two has “limited near-term product momentum” because its next big game, “Battleborn,” isn’t scheduled for release until May 3, which falls in the company’s fiscal 2017 first quarter, says Baird analyst Colin Sebastian. He rates Take-Two stock as neutral, with a price target of 38. One big disappointment is the lack of a new game on the horizon from Take-Two’s Rockstar Games, Pacific Crest Securities analyst Evan Wilson said in a research note Thursday. Rockstar is the studio behind the “Grand Theft Auto” and “Red Dead” franchises. “The Street had previously been hopeful for a big Rockstar release this year (Red Dead), but that is not happening, and we still have not heard any news for next year,” Wilson said. “It has now been two years since discussion about an imminent Red Dead announcement began.” Wilson rates Take-Two stock as sector weight, with a fair value in the mid-30s. Take-Two continues to benefit from two powerful tailwinds: faster-than-expected sales of current-generation consoles and the transition to digital revenue streams, which is driving improved profitability, Jefferies analyst Brian Fitzgerald said in a note Wednesday. He rates Take-Two a buy, and he raised his price target to 48 from 44. RELATED: Everybody Into The Pool! Take-Two Joins Esports Trend .

Level 3 Free Cash Growth: Fodder For Buybacks Or Acquisitions?

Level 3 Communications ’ ( LVLT ) stock jumped on stronger-than-expected free-cash-flow guidance after the telecom service provider early Thursday reported Q4 EPS that was a penny above Wall Street views, excluding a tax benefit. Revenue, though, just missed expectations. Some observers have speculated that Level 3 could announce a share repurchase program in 2016. Level 3’s guidance “suggests LVLT will be in a strong position to pursue strategic opportunities or buybacks,” said UBS analyst John Hodulik in a research report. Level 3 stock was up 6.5% in afternoon trading in the stock market today , near 50, but shares of the business service provider are still down 7% in 2016. Broomfield, Colo.-based Level 3 closed its $5.3 billion acquisition of TW Telecom in late October 2014. Thursday, Level 3 said it earned 53 cents in the December quarter, swinging from a 24-cent loss in the year-earlier period. Revenue rose 7% to $2.053 billion. Analysts polled by Thomson Reuters expected per-share profit of 52 cents and revenue of $2.06 billion. Level 3 said it expects 2016 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to rise 9% to 12%. It forecast 2016 free cash flow — net cash from operating activities minus capital expenditures — of $1 billion to  $1.1 billion. “EBITDA and FCF guidance easily outpaced expectations, and likely reflects the accelerated pace of (merger) synergy realization,” said Jefferies analyst Scott Goldman in a research report. Prior to TW Telecom, Level 3 bought Global Crossing for $1.9 billion in late 2011. At a UBS conference in January, Level 3 executives said they were studying  possible shareholder returns as well as possible acquisitions. Level 3 might pursue privately held XO Communications, Cowen & Co. analyst Colby Synesael said in a research note. Synesael says Level 3 could be a takeover candidate itself, with cable TV firm Comcast ( CMCSA ) the buyer. “2016 guidance including color around expected revenue growth acceleration and better than expected FCF are a positive,” Synesael wrote. In the content delivery network market, Level 3 competes with Akamai Technologies ( AKAM ). Image provided by Shutterstock .

Taylor Swift Video Game In Glu Mobile Investors’ ‘Wildest Dreams’

The rumored bad blood between pop stars Taylor Swift and Katy Perry soon will spill over into the mobile video game arena. Mobile game publisher Glu Mobile ( GLUU ) announced late Wednesday that it has partnered with Swift to develop a smartphone game set for release in late December. The pop star, known for such hit songs as “Wildest Dreams” and “Blank Space,”  will join Glu’s growing celebrity roster, which includes Perry, Kim Kardashian and others. Swift reportedly wrote her song “ Bad Blood ” about her fallout with Perry. Shares of low-priced small-cap stock Glu were up 31%, near 2.60, in early afternoon trading on the stock market today . Glu announced its deal with Tay-Tay at the same time it posted Q4 earnings that beat analyst expectations . San Francisco-based Glu earned 2 cents a share excluding items on sales of $57.9 million in the December quarter. Analysts polled by Thomson Reuters expected Glu to lose 3 cents a share on sales of $50.5 million. On a year-over-year basis, earnings per share tumbled 82% and sales fell 24%. Glu Mobile CEO Niccolo de Masi attributed the Q4 outperformance to continued strong results from its top games – “Kim Kardashian: Hollywood,” “Cooking Dash 2016,” “Racing Rivals” and “Deer Hunter 2016.” Meanwhile, “Katy Perry Pop,” launched Dec. 17, was widely seen as a flop, blamed on poor game design. Other upcoming celebrity video games from Glu will feature pop singers Britney Spears and Nicki Minaj, reality TV stars Kendall and Kylie Jenner, and chef Gordon Ramsay. By signing Swift, Glu has effectively locked up the market for games featuring high-profile female celebrities, Cowen analyst Doug Creutz said in a research report Thursday. “At the very least, we believe Glu has eliminated any possibility of real competition in the genre for the next several years,” Creutz said. Last month, Glu agreed to take a minority stake in Plain Vanilla Corp. , based in Reykjavik, Iceland. Plain Vanilla is the developer behind the globally popular game “QuizUp.” Glu also has an option to acquire the company at a pre-agreed price. The competitive landscape in mobile gaming is beginning to shake out, de Masi said on a conference call with analysts. “New company formation has slowed dramatically as venture capital has dried up,” he said. “Over the next 24 months, I anticipate significant consolidation and the emergence of fewer, bigger, stronger global firms.” In November, Activision Blizzard ( ATVI ) agreed to buy “Candy Crush” mobile game maker King Digital Entertainment ( KING ) for $5.9 billion. Other major players in the mobile game market include Supercell, Machine Zone, Rovio, Electronic Arts ( EA ) and Zynga ( ZNGA ). Image provided by Shutterstock .