UPDATE 3-Take-Two outlook disappoints, posts bigger Q4 loss

* Q4 adjusted earns miss expectations

* Q1 outlook sharply below Wall Street target

* Shares drop 20 percent in extended trade (Adds analyst comment)

SAN FRANCISCO, Dec 17 (Reuters) - Take-Two Interactive Software Inc TTWO.O, "Grand Theft Auto" video game publisher, set a 2009 profit target far below Wall Street estimates on Wednesday, citing weakness in retail sales, and its shares fell 20 percent.

The company also reported its fourth-quarter net loss more than doubled, and it missed the average analyst target.

Take-Two Chairman Strauss Zelnick told Reuters the company “witnessed significant softness” in store sales. That was a shock for investors after total video game U.S. sales rose 10 percent in November, indicating the industry was weathering the downturn better than most.

Take-Two expects profit to range between nil and 20 cents per share for the year ending in October 2009, significantly missing the average analysts’ estimate of $1.21 per share.

The company forecast first-quarter revenue between $175 million and $225 million, below Wall Street estimates of $311 million, as per Reuters Estimates.

“There’s no full version of ‘Grand Theft Auto’ coming out this year. That’s a big problem. GTA is their big moneymaker,” said Wedbush Morgan analyst Edward Woo. “They are definitely having a weaker outlook than what everyone expected for them to have. The industry is healthy.”

The company reported its fourth-quarter net loss widened to $15 million, or 20 cents a share, from $7.1 million, or 10 cents a share, a year ago.

Excluding stock-based compensation expenses, expenses related to unusual legal matters and business reorganization costs, New York-based Take-Two earned a fourth-quarter profit of 2 cents per share, missing the average Wall Street estimate of 4 cents profit, according to Reuters Estimates.

Take-Two forecast an adjusted first-quarter loss ranging between 70 cents and 85 cents, sharply missing the average analyst estimate of 4 cents, according to Reuters Estimates.

Chief Executive Ben Feder called the forecasts “a prudent response to the difficult current and possible future business conditions.”

Shares of Take-Two fell to $9.65 in extended trade on Nasdaq after closing at $12.07.

Wedbush's Woo said Take-Two's falling stock is a "disappointment" for the company's shareholders, but a positive for rival Electronic Arts Inc ERTS.O, which dropped a hostile bid to acquire Take-Two for roughly $2 billion in September. (Reporting by Jennifer Martinez and Peter Henderson; editing by Jeffrey Benkoe)