Nintendo (PINK: NTDOY) has had a good summer. Nintendo stock jumped up +6% following the announcement of their new glasses-free, stereoscopic 3D handheld gaming machine — the Nintendo 3DS — this past June. And while NTDOY stock prices have dropped from that high over the course of the second quarter, Nintendo has stayed relatively firm between $33 and $35 per share for a year-to-date gain of over +13% in 2010.
But the future is uncertain for Nintendo stock. This week, NTDOY sent out a press release announcing its software line up for the remainder of 2010. While there doesn’t appear to be a runaway hit in the vein of last year’s New Super Mario Bros. Wii, which has sold 15.8 million copies since it came out last November, their line up is deep. Both internally developed games and third-party products crowd the schedule – though how they could perform is really anyone’s guess without a guaranteed blockbuster hit and amid continued weak consumer spending.
Specifically, Nintendo will release new Wii games in a number of their classic franchises, including sci-fi adventure Metroid: Other M, popular children’s property Kirby: Epic Yarn, the return of arcade icon Donkey Kong in Donkey Kong Country Returns, and variety game Wii Party. Of the lot, Wii Party has the greatest earning potential for Nintendo. Both the game’s Wii branding and the fact that it’s a collection of small simple games should help it capitalize on the success of other Nintendo efforts like Wii Play and Wii Sports Resort, which have sold 26.7 million and 16.1 million copies respectively. Other major releases for the Wii include a remake of GoldenEye 007, an Activision Blizzard (NASDSAQ: ATVI) offering. based on the James Bond film of the same name. There’s also also Epic Mickey, an adventure game from Disney Interactive (NYSE: DIS) starring the corporation’s mascot in a distinct new style.
Still, investors looking to buy NTDOY stock before the holiday rush should be patient. It’s looking as though the Nintendo Wii market may have reached its saturation point, and hardware sales are slumping. This is by far the biggest driver of profits and a decline in Nintendo Wii units spells trouble.
NPD Group reported that Nintendo sold just 253,900 Wiis in July, and while that figure is similar to the same month in 2009, Wii sales have seen a 17% decline overall in 2010. Software sales have declined a shocking 20%, thanks almost purely to the drop off in sales of products from third-party developers. French company Ubisoft’s Red Steel 2, one of the year’s biggest Wii releases so far, has sold a measly 270,000 since its release in March. Similar products from Activision and Electronic Arts (NASDAQ: ERTS), particularly entries in respective franchises like Call of Duty and Dead Space, have fared about as well on Nintendo’s Wii console.
While the Nintendo DS handheld console continues to sell well, poor hardware and software sales in the home market should leave Nintendo vulnerable throughout the fall and into 2011. Even with a compelling software line up, Nintendo simply doesn’t have a product to draw attention away from Microsoft (NASDAQ: MSFT) and its new motion control device, Kinect, for the Xbox 360.
With flagging hardware sales, no software standout and the Xbox Kinect stealing the limelight, it’s likely a significant drop is in store for Nintendo – especially if consumer spending remains weak. Of course a runaway hit with Wii Party or the new Metroid is possible, but that seems unlikely in the current climate.
After the holidays are over, the early 2011 release of the Nintendo 3DS could cause a spike in NTDOY stock. But that’s a long time to wait and a lot can happen in the meantime. Investors may be wise to just sit tight and wait on buying Nintendo until the holiday season is over.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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