Shares of video-game enterprise Take-Two Interactive (NASDAQ:TTWO) saw its shares rise strongly during the midweek session. Soon, the company will be included in the technology benchmark Nasdaq 100 index, thereby boosting visibility for TTWO stock. Nevertheless, the company faces increased scrutiny, particularly due to a delayed title release.
According to a Seeking Alpha report, two factors contributed to the promotion of TTWO stock to the aforementioned index. First, the Nasdaq undergoes a reconstitution annually, potentially opening the door for promising enterprises. Second, pharmaceutical giant Pfizer (NYSE:PFE) recently received the regulatory greenlight to acquire cancer drugmaker Seagen (NASDAQ:SGEN). That opens space for Take-Two to come in.
Notably, Pfizer expects to complete the acquisition on Dec. 14, subject to the satisfaction of other customary closing conditions. As for TTWO stock, the Nasdaq’s reconstitution will become effective prior to the opening bell on Dec. 18.
Fundamentally, the promotion to the index bodes well for Take-Two, a holding company that owns and operates several video game development studios, such as Rockstar Games and 2K Games. Known as the inclusion effect, this phenomenon describes a temporary increase in the price of a security when it becomes part of the S&P 500 index.
However, the same principle of boosted visibility underlines promotions to the Nasdaq 100.
TTWO Stock Rises, But Some Questions Linger
Indeed, an argument could be made that in the modern age, becoming integrated with the Nasdaq 100 represents a more relevant (if not more valuable) achievement than becoming integrated with the S&P 500. While both statuses signify great achievement, the reality is that with the Nasdaq 100 flying up nearly 51% year-to-date, it has simply dominated the broader business discourse.
As for practical implications benefiting TTWO stock, increased visibility translates to possible inclusion into index funds and exchange-traded funds (ETFs). For example, many investors enjoy passively managed funds that track specific indexes like the Nasdaq 100. So, when Take-Two officially becomes part of the family, index-focused ETFs will automatically purchase TTWO shares.
To be sure, the video game company seemingly doesn’t need the help. Since the January opener, TTWO stock soared almost 57%. However, with Take-Two disclosing that it won’t release its hotly anticipated video game from the Grand Theft Auto franchise until 2025, some experts see headwinds brewing.
Notably, BofA Securities analyst Omar Dessouky downgraded Take-Two stock to “neutral” from “buy” last week. Citing uncertainty over the timing of the game’s launch, Dessouky also added that Rockstar Games has a history of delaying launch dates.
Others, such as Raymond James analyst Andrew Marok stated that the timing was somewhat disappointing. Still, he believes in the broader bullish thesis given the anticipation of the title.
Why It Matters
At the moment, analysts rate shares a consensus strong buy. This assessment breaks down as 16 buys and three holds. However, because of the robust performance of TTWO stock this year, the average price target of $166.16 implies only about 3% growth.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
