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From April 1, 1997 to September 9, 2019 Nintendo stock returned roughly 454% versus the S&P 500 return of roughly 292%
— Source: Stockcharts.com
 

COMPANY PROFILE

Nintendo Co., Ltd., together with its subsidiaries, develops, manufactures, and distributes electronic entertainment products in Japan, the United States, Europe, Australia, Asia, and internationally. It owns some serious brands like: Pokémon, Super Smash Brothers, Mario Brothers, Zelda, etc. It provides video game platforms, playing cards, Karuta, and other products; and handheld and home console hardware systems and related software. The company operates two stores in Israel and New York. The company was formerly known as Nintendo Playing Card Co., Ltd. and changed its name to Nintendo Co., Ltd. in 1963. Nintendo Co., Ltd. was founded in 1889 and is based in Kyoto, Japan.

The Nintendo Switch Light launches late September, the early reviews are very positive and I can’t wait to get one to do my “due diligence”.

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Recent Earnings

  • Nintendo sold 4.98 million units of its hybrid home-portable Switch device in the six months to September.

  • Sold 1.95 million handheld-only Switch Lite units that went on sale in September.

  • Second-quarter profit doubles beating estimates handily

  • Switch sales climb 50% from a year ago to 4.9 million units

  • Net sales for the prior six months +14.2%

  • Operating profit +53%

  • Margins just keep expanding, there’s so much room for growth here.

  • In typical Nintendo style, they offered no change of guidance and remained conservative with projected net sales and operating profit of 4% next 6 months. CONSERVATIVE IMO, they are early in the process of building momentum and monetization across all their platforms & games.

  • Digital business for dedicated video game platforms - 83.0% increase on a year-on-year basis

  • Total mobile business: Dr. Mario World in July, and Mario Kart Tour in September - 6.4% increase on a year-on-year basis

  • A very sneaky big potential hit coming. I think I’ll get one for my mom this Xmas: Ring Fit Adventure, a title which, using the Switch’s sensor-packed controllers and the bundled springy plastic Ring-Con, allows players to explore a fantasy world through actions like jogging and jumping.

  • Mario Kart Tour, a smartphone game, had the second-biggest opening month in mobile gaming history, raking in almost 124 million app downloads.That’s impressive!

  • For perspective, that’s the second-biggest launch in mobile gaming history behind "Pokémon Go, another Nintendo hit.

  • Mario Kart Tour also pulled in $37.4 million through in-app purchases.

  • The multiplayer option is currently not an option but it’s clearly a focus for the company so stay tuned for that announcement.

  • The Pokemon franchise continues to pay dividends with further growth via retail stores with the launch of a Nintendo-themed store in Tokyo’s Shibuya district.

  • Pokémon has generated over $3B in sales this far, certainly a tall bar to overcome for other titles.

  • Great note from video gaming expert on Twitter below. Their partner in China is TenCent and that is enormously helpful versus going it alone. follow him at @ZhugeEX

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Opinion

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Nintendo scores well as of 9/17/19:

  • 92% high 3YR sales growth

  • 93% margin expansion

  • 93% strong price momentum

  • 100% low debt to enterprise value

  • 90% high cash balance over total market cap

  • 87% high 3YR projected dividend growth

  • 72% high 1YR sales growth

Nintendo may just be the video gamer with the best upside over the next few years, they are constantly under-appreciated (sometimes for good reasons) but they seem to be firing on all cylinders currently and sand-bagging analysts and the stock is super cheap, that’s a lovely combination that will not last forever. I think they will have a very good holiday season in the U.S. if early indications are the new trend. With a super conservative management team and some big early hits, NTDOY may just be the sleeper stock next year in the portfolio. Nintendo has not performed as well as a brand this strong should have performed but through all the changes in the video gaming industry, Nintendo just keeps on chugging. I’ve been following the company for a very long time and the current Nintendo has a significant opportunity ahead. Bottom line, the industry trends toward digital downloads, an attractive growth profile, a strong balance sheet, super valuable IP across game properties and an inexpensive stock all paint a very bullish picture for Nintendo. The pay a nice 2% dividend as well.

The video game industry is one of rapid innovation, increasingly expensive R&D, and changing consumer tastes that happen almost daily. But make no mistake, gaming is not a fad, it’s here to stay and caters to 2 very large demographic groups around the world: the Millennials and Gen-Z. The number of gaming companies competing is enormous but Nintendo likely has the most recognizable brand of the group. They’ve been at it for a very long time and have some marquee properties with a huge following.