The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Nintendo Stock Prediction

Summary:

The Niantic Labs-developed Pokemon Go mobile game is largely responsible for Nintendo’s stock rally earlier this year.

Pokemon Go’s estimated September net sales from iOS players was $46 million, and $47 million from Android players.

Nintendo hopes to replicate Pokemon Go’s commercial success with its in-house developed Super Mario Run mobile game.

Like the Pokemon franchise, Super Mario also touts a loyal crowd of fans.

Nintendo’s stock has positive long-term algorithmic market trend signals. Buying it now before Super Mario Run is released next month might prove profitable.

Nintendo (NTDO) is working hard to replicate the massive commercial success of Niantic Labs’ Pokemon Go mobile game. Nintendo’s market cap got boosted by as much as $7.5 billion back in July after Pokemon Go was released. Nintendo’s stock price therefore could probably go higher again after it comes out with another hit mobile game.

Becoming a successful mobile games publisher could also help Nintendo offset its declining presence in the game console hardware industry. Microsoft (MSFT) and Sony (SNE) are now the runaway leaders in video game console products.

Nintendo’s own Super Mario Run mobile game will debut next month. Noted game analyst Dr. Serkan Toto has already predicted that Super Mario Run could achieve more than one billion downloads. The more people who download free-to-play mobile games, the more potential customers there will be for in-app purchases.

(Source: Nintendo)

Dr. Toto’s 1 billion download estimates for Super Mario Run is not farfetched. The Super Mario character is another iconic game hero that has legions of fans. In fact, Super Mario has been a global icon since his debut in 1981. Like Pokemon, a Nintendo Super Mario game has great chances of becoming hit titles.

The economic benefits of Super Mario Run getting more than one billion downloads is easy to guesstimate. The average annual spending of mobile gamers on in-app purchases is $87. If we calculate that around 3% of 1 billion downloaders of Super Mario Run will spend an average of $87, Nintendo’s annual net sales from could be:

1 billion x 0.03 x $87 = $2.61 billion

Deduct the 30% commission of Google (GOOGL) Play Store and Apple’s (AAPL) App Store, and we get net sales of $1.827 billion. NTDOY’s price could climb back to its 52-week high of $38.25 if Super Mario Run becomes as successful as Pokemon Go.

Pokemon Go’s Revenue Is Shared With Niantic

Unlike Pokemon Go (which Niantic Labs developed), Super Mario Run’s future net sales from in-app purchases will entirely go to Nintendo. Consequently, Super Mario Run’s performance is therefore a more important barometer to gauge the future success of Nintendo.

Pokemon Go’s success is largely due to it achieving more than 500 million downloads. As per the data of SensorTower, Pokemon Go’s estimated monthly net sales from iOS devices was $46 million and $47 million from Android devices.

Unfortunately, Niantic Labs is likely getting most of the in-app sales from Pokemon Go. Nintendo is only probably getting 5%-15% of Pokemon Go’s monthly net sales. Nintendo only owns 33% of the Pokemon Company, which licensed the Pokemon Go game to Niantic Labs.

On the other hand, game developer Niantic Labs is now valued at over $3 billion after the success of Pokemon Go. Nintendo and the Pokemon Company (which Nintendo co-owns) are some of the eight investors in Niantic Labs. Nintendo therefore has future benefits if Niantic Labs does an IPO, or gets bought out by a bigger gaming firm.

(Source: CrunchBase)

Conclusion

The future of video games is in mobile devices. Newzoo’s global games forecast chart below predicts that revenue from mobile games will be around $36.9 billion this year. Three years from now mobile games could generate $52.5 billion in global revenue. Any game publisher/developer will get left out if they do not have a viable portfolio of mobile game titles.

I am endorsing a Buy for NTDOY. It is very commendable that Nintendo is working hard to make it big in mobile games. I expect Nintendo to release more mobile games next year. Aside from Super Mario, Nintendo has a lot of proprietary game heroes that could be used to develop more mobile games.

My buy rating for NTDOY is in line with the positive 3-month and one-year algorithmic market trend signals from I Know First.

Analysis of the monthly or long-term technical indicators and moving averages also endorses NTDOY as a Strong Buy. I might sell some AAPL shares to finance a buy-in at NTDOY within this month.

(Source: Investing.com)

I Know First Past Success With NTDOY