What's the State of Take-Two Interactive Software With Its Blockbuster Hit Looming in 2026?

Share prices of renowned video game developer Take-Two Interactive Software (NASDAQ: TTWO) have climbed over 30% higher since January, outpacing the broader market. It's likely in anticipation of the 2026 release of Grand Theft Auto 6, arguably the most high-profile upcoming video game in history.

The Grand Theft Auto series represents the pinnacle of the video game industry. The company's previous iteration, Grand Theft Auto 5, continues to generate substantial revenue through game sales and online play, despite its age -- the game came out in 2013.

There has been some controversy, including delays that have pushed the release of Grand Theft Auto 6 back to the fourth quarter of 2026.

Here is where the company stands heading into 2026, and whether buying the stock now makes sense.

Image source: Getty Images.

Lumpy growth but an upward long-term trajectory

Grand Theft Auto 6 will likely have a tremendous impact on Take-Two Interactive's business. Wall Street analysts currently estimate the company's full-year earnings per share at $3.28, then that skyrockets to $7.97 next year. Barring Grand Theft Auto 6 flopping unexpectedly, an unlikely event in the opinion of this humble video game enthusiast, it's probably more helpful for investors to zoom out and evaluate Take-Two Interactive's broader positioning in the video game space.

Video game franchises are intellectual property, just like in film and television. Take-Two Interactive has a competitive moat, boasting top-notch franchises across multiple platforms, including computer and console gaming, as well as mobile devices.

In addition to Grand Theft Auto, Take-Two Interactive's franchises include Red Dead Redemption, Borderlands, and NBA 2K, among others. Meanwhile, it also owns Zynga, a leading mobile game developer behind 15 of the top 200 games in the United States.

The video game industry continues to grow as technology enables its global reach. That positions the company for long-term growth, even if it is a cyclical stock due to the volatile nature of its business.

Is the stock a buy now?

Ironically, it's often wise to invest in cyclical stocks at the bottom of their business cycle, when earnings are depressed.

Take-Two Interactive is currently at the bottom of its business cycle. The stock appears to be overvalued, with a price-to-earnings ratio of 75 times its estimated 2025 earnings. Then, it will suddenly look cheap once Grand Theft Auto 6 comes out and revenue and profits soar. Investors should probably get in front of that catalyst, rather than chase it.

Instead of trying to map out such volatile earnings, consider stepping back to view the long-term trend. Analysts expect Take-Two Interactive to grow its earnings by an average of 34.5% annually over the next three to five years.

Whether the growth is lumpy or smooth, the stock is priced at a PEG ratio of 2.1 today, a solid entry point for arguably the Walt Disney of the video game industry. Buying and holding Take-Two Interactive here is likely to work out well over the next five years and beyond, as Grand Theft Auto 6 churns out revenue for years to come.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Take-Two Interactive Software and Walt Disney. The Motley Fool has a disclosure policy.