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NTDOY Hasn’t Reached its Peak Yet

May 11, 2018


Late last month, Nintendo (NTDOY) announced that its current CEO is stepping down and would be replaced by a board member. A change in management in a company that has been a leader in the gaming space might throw up some red flags, but not in this case.

Current CEO Tatsumi Kimishima was behind the success of the Switch console, which helped NTDOY more than double its revenue in fiscal 2017 to $9.66 billion. Believe it or not, there have already been 18 million Switch consoles sold, easily beating the 13.5 million units of the widely popular Wii U console sold over a five-year timeframe.

Of course, losing Kimishima will sting given all he’s given to the company, but incoming CEO Shuntaro Furukawa is more than capable of taking the reins. His goal is to continue  the growth of NTDOY by turning its attention to mobile gaming. In fact, he believes the company can reach sales of over $900 million in smartphone games alone.

If you think back a few years you may remember the success Nintendo had with its Pokemon Go game, which went viral for a few months. Since then the company’s focus has been on the Switch, and while that’s paid off handsomely there is some room to expand.

NTDOY has lagged its competitors when it comes to the mobile gaming space. It entered the fray in March 2016 and other than Pokemon Go it has not pushed any other big games. Including licensing revenue, the mobile gaming unit only produced sales of around $360 million last year, making up about 4% of total revenue. If the company can muster up a few big mobile game hits, which I believe is inevitable, the division could eventually generate over $1 billion in revenue.

The Icing on the Cake

Another event that will continue to drive NTDOY is the much-anticipated launch of Nintendo Switch Online, which was recently announced would hit the market in September. Pricing will range from $3.99 for a one-month subscription up to $34.99 for an annual plan. By keeping costs low, the company can open up the online game world – which has already been made available by competitors – to the more than 18 million (and growing!) users of the Switch console.

Nintendo has been a household name for decades, and once again it has transformed itself to keep up with the ever-changing times and technologies. Plus, it’s well positioned in the eSports sector – which happens to be one of my favorite NexGen mega-trends – that is only expected to keep growing for the next ten years or more. Therefore, the combination of new revenue streams from the online launch and the expansion into mobile gaming will be the icing on the cake for a company that is already firing on all cylinders.

NTDOY has found itself in the midst of a parabolic uptrend since 2015, but over the last few months it has begun to consolidate in the low $50s. With the stock now trading around $53 and holding strong long-term support at $50, it’s signaling that now could be a good time to buy for long-term investors.

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