After the blockbuster success of Pokémon Go, Nintendo Co. Ltd. NTDOY might have another big hit. Yesterday, in a press release, the Japanese video game giant said that Pokémon Sun and Pokémon Moon for Nintendo 3DS, (already the most pre-ordered games ever for the company) have now become the “fastest selling games” in the Americas with over 3.7 million units sold in less than a fortnight. The earlier record was held by Pokémon X and Pokémon Y games, which released in 2013.
The Pokémon Go craze has definitely given these new 3DS game a little more boost. At its last earnings release (for the six months ended Sep 30, 2016), management noted that the enthusiasm surrounding Pokémon Go also helped sales of its 3DS console.
Doug Browser, Nintendo’s Senior Vice President of Sales and Marketing for Americas stated “With these huge sales figures, Pokémon Sun and Pokémon Moon have proved themselves as two of the hottest video games to buy this holiday season. With great reviews and outstanding fan response, these next iterations in the Pokémon series are sure to please any player in the family.”
The Pokémon franchise has been a monster hit for Nintendo. Per Nintendo, sales of Pokémon-related software topped the 280 million units mark as of May 2016, globally, since it was launched alongside Pokémon Red and Pokémon Blue games in 1996. Apart from Pokémon Games, there is also cartoon series as well as movies and merchandise based on Pokémon. In fact, Nintendo’s Mario and Pokémon are widely recognized as the most successful video game franchises in the world.
The year so far has been good for Nintendo, which is basking in the success of Pokémon Go. Shares have generated a return of 78.67% compared with the Zacks Other Consumer Discretionary Industry’s gain of 10.64%.
One thing to be noted is that though the success of Pokémon Go didn’t directly benefit Nintendo’s financials, it did strengthen Nintendo’s position in the lucrative mobile games space. This should help it to sustain the momentum going ahead. Pokémon Go was developed by Niantic in association with The Pokémon Company, owned by Nintendo.
Nintendo so far has had limited presence in the mobile games space. Nintendo finally warmed to the idea of mobile games last year and struck a deal with DeNA to bring five mobile games by Mar 2017.
Again with Pokémon Sun and Pokémon Moon having hit the jackpot, the stock should continue with its upward trend. Plus, Nintendo is scheduled to release another 3DS game this year, Super Mario Maker (a Wii U smash hit) in December. The success of these games might benefit the sale of its 3DS console too.
Then there is the highly anticipated Super Mario Run releasing on Dec 15, 2016 for $9.99 across 151 countries. This is the first time that Nintendo has collaborated with Apple Inc AAPL to bring its games on the iOS platform.
Analysts observe that Nintendo was trying to protect its console business by not letting its well known characters like Mario and Zelda appear on mobile platforms. However, mobile games started emerging as a lucrative business option as titles like Candy Crush and Angry Birds caught the imagination of the world. As per an Apr 2016 report, research from Newzoo estimates the global games market to grow 6.6% to $118.6 billion in 2019, of which $52.5 billion will come from mobile games.
Apart from games, Nintendo’s revival of its classic NES console is also a big factor. Though the supply shortage has been a deterrent, Mini NES classic has found many takers. Given expectations of an improving supply trend in the coming days, mini NES is expected to “reign the holiday sales” as per media reports.
Moreover, the company is hoping to turn its fortunes around with its next video game device, Switch, slated for launch in Mar 2017. Nintendo’s gaming consoles 3DS and Wii U have been underperforming for quite some time and are losing ground to Sony’s SNE PS4 and Microsoft’s MSFT Xbox one. In fact, Wii U has been the company’s lowest selling gaming console.
At present Nintendo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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