Take-Two Interactive Software, Inc.TTWONASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Terminal value represents 92% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Hold

Fair Value: $195.46 per share(market-calibrated)

-8.6%

Upside to Fair Value

Current

$213.88

Pure Model

$192.33

Fair Value

$195.46

Bull Case

$270.32

Bear Case

$132.24

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

4.76%

Calibrated Growth

3.90%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $192.33.

What's Driving This Ratingfor TTWO

✓

CapEx already efficient

CapEx at 2.64% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is -26.25% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $888M (8.21% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 18.55% in Year 1 to -1.97% by Year 5 (per analyst consensus). That's below the 3.75% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $161.16/share (24.3x terminal FCF) while exit multiple gives $223.50/share (33.6x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $213.88, the market implies 4.76% perpetual growth — 101bps above the model's 3.75%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 83.22% indicates efficient cash generation. FCF reaches $2.5B by Year 10 (23.39% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.93

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.69%

Cost of Debt

Pre-tax Cost of Debt2.38%

Tax Rate21.00%

After-tax Cost of Debt1.88%

Equity Weight (E/V)90.12%

Debt Weight (D/V)9.88%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (90.12% × 8.69%) + (9.88% × 1.88%)

= 8.02%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$6.7B	$9.3B	$10.1B	$10.0B	$10.8B
EBIT	-$1.8B	-$2.5B	-$2.6B	-$781M	$888M
Tax	-$368M	-$515M	-$555M	-$164M	$186M
NOPAT	-$1.4B	-$1.9B	-$2.1B	-$617M	$701M
+ Depreciation	$1.3B	$1.9B	$2.0B	$2.0B	$2.2B
- Capex	$176M	$246M	$265M	$264M	$285M
- Δ NWC	$103M	$21M	-$20M	$3M	$39M
Free Cash Flow	-$335M	-$346M	-$330M	$1.1B	$2.5B
Discount Factor	0.926	0.793	0.680	0.583	0.462
Present Value	-$310M	-$275M	-$224M	$646M	$1.2B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.5B

Terminal Growth Rate3.75%

WACC8.02%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$61.5B

PV of Terminal Value$28.4B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$85.1B

PV of Terminal Value$39.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$2.4B

PV of Terminal Value$28.4B

Enterprise Value$30.9B

(-) Net Debt$2.6B

Equity Value$28.2B

Shares Outstanding175M

Price per Share$161.16

Exit Multiple Method

PV of Projected FCFs$2.4B

PV of Terminal Value$39.4B

Enterprise Value$41.8B

(-) Net Debt$2.6B

Equity Value$39.1B

Shares Outstanding175M

Price per Share$223.50

Pure Model Fair Value

$192.33

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
6.02%	$264.35	$287.96	$321.99	$339.63	$324.16
7.02%	$212.01	$224.21	$240.15	$261.85	$293.12
8.02%	$176.28	$183.46	$192.33	$203.55	$218.21
9.02%	$149.65	$154.25	$159.72	$166.33	$174.49
10.02%	$128.71	$131.82	$135.43	$139.66	$144.69

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$132.24

-38.2% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.16

Base Case

$192.33

-10.1% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.93

Bull Case

$270.32

26.4% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.79

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth18.55%

Year 3 Revenue Growth2.39%

Year 5 Revenue Growth-1.97%

Year 7 Revenue Growth0.32%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin-26.25%

Terminal EBIT Margin25.00%

Tax Rate21.00%

Historical Capex / Rev2.64%

NWC / Revenue9.85%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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