Take-Two Interactive Software (NASDAQ:TTWO) is set to announce its earnings on Thursday, May 15, 2025. Historically, the stock has shown a tendency for favorable one-day returns after its earnings announcements. An examination of the previous five years indicates that TTWO achieved a positive one-day return in 61% of those cases, with a median positive return of 5.9% and a maximum positive return of 14%.
For event-driven traders, recognizing these historical trends could provide a potential strategic edge. Two primary strategies to consider are:
- Pre-Earnings Positioning: Given the historical likelihood of a positive one-day return, traders might contemplate entering a position prior to the earnings announcement.
- Post-Earnings Analysis: Conversely, traders could assess the relationship between the immediate stock response to the earnings and its following medium-term performance, positioning themselves accordingly once the results are disclosed.
It is crucial to remember that while historical data offers significant insights, the actual market reaction will heavily depend on how TTWO’s reported earnings align with market consensus and expectations. Current consensus estimates predict a loss of $0.05 per share on revenues of $1.55 billion. This contrasts with a reported loss of $17.02 per share on revenues of $1.35 billion during the same period last year.
From a fundamental standpoint, Take-Two Interactive Software currently holds a market capitalization of $40 billion. Over the past twelve months, the company generated $5.5 billion in revenue while incurring operational losses of $968 million, leading to a net income of -$3.7 billion.
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Take-Two Interactive Software’s Historical Odds Of Positive Post-Earnings Return
A few points regarding one-day (1D) post-earnings returns:
- There are 18 earnings data points recorded over the past five years, with 11 positive and 7 negative one-day (1D) returns noted. In summary, positive 1D returns were observed about 61% of the time.
- Significantly, this percentage rises to 70% when considering data from the last 3 years instead of 5.
- The median of the 11 positive returns = 5.9%, while the median of the 7 negative returns = -5.9%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though it may not be effective if the correlation is low) is to understand the correlation between short-term and medium-term returns after earnings, identify a pair that shows the strongest correlation, and make the appropriate trade. For instance, if 1D and 5D display the highest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on the past 5-year and 3-year (more recent) history. Note that the correlation 1D_5D pertains to the relationship between 1D post-earnings returns and the subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers can impact the stock response after earnings. In fact, the market may start to react before the earnings are disclosed. Here is some historical data regarding the previous post-earnings performance of Take-Two Interactive Software stock compared to the performance of peers that announced earnings shortly before Take-Two Interactive Software. For a fair comparison, peer stock returns also reflect post-earnings one-day (1D) returns.
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