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Cramer: Videogame maker undervalued?

Friday, 17 Jan 2014 | 6:15 PM ET
Gaming with Take-Two's CEO
Friday, 17 Jan 2014 | 6:15 PM ET
Strauss Zelnick, chairman and CEO of Take-Two Interactive Software, tells Mad Money host Jim Cramer the market may still believe Take Two is just about Grand Theft Auto but its digital content is as much as 30 percent in the prior quarter.

(Click for video linked to a searchable transcript of this Mad Money segment)

Quite simply Jim Cramer thinks the stock of this company should be higher.

The stock is Take-Two Interactive and the "Mad Money" host is convinced that investors have erroneously punished this video game maker after GameStop lowered its forecast and Best Buy released disappointing sales numbers.

"In both of those cases, the stocks had gotten too high off of repeated analyst upgrades, so when the companies stumbled, those stocks were eviscerated," Cramer noted.

That doesn't characterize Take-Two, at all, Cramer insisted.

Scene from 'Grand Theft Auto V'
Source: Rockstar Games
Scene from 'Grand Theft Auto V'

According to Cramer, as the maker of the popular Grand Theft Auto 5 game, the most successful game of 2013, Take Two should be knocking it out of the park.

Yet the Street isn't rewarding Take-Two at all.

"On September 17th, when Take-Two released the latest version of Grand Theft Auto, Take Two was a $17 stock. Then, on October 29th, the company reported a spectacular blowout quarter, I mean just a colossal earnings beat with raised guidance to boot, and the next day it's trading at $17 and change. And that quarter only included two weeks of Grand Theft Auto! Fast forward to today, and the stock is still at $17.05."

"That's absurd!" Cramer exclaimed.

And he added that the company has other popular franchises, as well, that also warrant a higher share price.

"They also make BioShock, Max Payne, Civilization, Borderlands, and successful sports simulations like NBA 2K and Major League Baseball 2K," Cramer noted.

In aggregate, Cramer thinks all of these titles should be moving the needle.

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"This is a company that's been incredibly successful, yet its stock hasn't been rewarded for that success at all. That doesn't make sense, especially when you back out the cash on the balance sheet," said an aggravated Cramer.

"When I consider the accomplishments of Take Two Interactive, my favorite videogame maker and the lackluster price action, I'm honestly at a loss for words. Except this - it's absurdly cheap."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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