Nintendo Stock Soars 59% in One Week after Launch of Pokemon Go App
Downloads and user engagement continue to set records for both iPhone and Android users and the app was even temporarily experiencing difficulties due to capacity overload.
Remember the time when everyone was playing Pokemon on the Game Boy at the end of the 1990s? Well Pokemon fever is back and Nintendo investors are cheering as the stock is soaring higher.
Nintendo is trading on the Tokyo Stock Exchange with the ticker code 7974.TKS. On 6th July the stock was valued at ¥14,380 (~A$180) and following the release of the Pokemon Go mobile application last week, the stock took off to reach ¥22,840 (~A$286), an increase of 59% in just one week.
Nintendo Co Ltd (7974.TKS) is a Japanese international software and consumer electronics company, headquartered in Kyoto, Japan. The company was founded in 1889 and made ¥504.459 billion (~A$6.3bn) in revenues last year.
Why the Hype about Pokemon Go?
Well, I am probably not in a position to explain why people around the globe love Pokemon. However I do know that it was every boy’s dream to go out and catch Pokemon, just like the main characters did in the famous game genre or TV show. The new app ‘Pokemon Go’ allows users to walk around with their smartphone and search Pokemon in the real world. The app encourages environment interaction utilising GPS as it merges game with reality, thus providing a unique experience. The game is a perfect combination of simplicity, user interaction and the Pokemon brand.
Downloads and user engagement continue to set records for both iPhone and Android users and the app was even temporarily experiencing difficulties due to capacity overload. So far the application has only been released in the U.S. and Australia but is expected to launch in Europe and Asia shortly.
The mobile application itself is free, but Nintendo has now created a platform that can be monetised by offering in-app purchases. King’s Candycrush application makes over US$1bn per year and early download and engagement rates indicate that Pokemon Go could be a similar success story.
What is Happening to the Nintendo Stock?
Since the launch of the smartphone application, Nintendo’s stock has soared nearly 60% as investors bet that the Pokemon Go app will boost revenues and earnings for the consumer electronics and software giant. During the year ended March 2016, Nintendo experienced a 8.2% contraction in net sales and profit slumped 61%.
Image: Share price of Nintendo Co Ltd between January - July 2016
Over the past few years the stock’s performance has been lacklustre and Nintendo is still trading well below pre-GFC levels. In fact, in 2007 the value of Nintendo was three times greater than it is now. Market sentiment has been very negative towards the stock during the past few years, however we have yet to see if the most recent surge is sustainable or if it is simply a ‘hype’.
If you want to buy stock, you need to enquire with your broker if you are able to purchase international shares on the Japanese Stock Exchange. If you are not sure why there is such a hype, maybe just download the free app and decide for yourself. On that note: ‘Gotta catch ‘em all!’
Author: Simon Herrmann
Jul 13, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.