This time last year, Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) was in the dumps. It was losing money and its Wii U console wasn’t selling. The closest thing to a bright light appeared to be the success of the mobile game Pokemon Go, but that didn’t provide much “go” to the NTDOY stock price.
What a difference 12 months makes.
Nintendo is profitable, thanks to strong sales of its Switch console. And with a roster of new games coming, continued expansion into mobile gaming, and consumers chomping at the bit to get their hands on the upcoming Super NES Classic, Nintendo stock is up more than 63%.
One Year Ago, Nintendo was Struggling
Go back a year, and NTDOY wasn’t doing well at all.
In the quarter ending June 2016, the company sold just 220,000 units of its Wii U console. Compare that to the more than 867,000 Playstation 4 consoles sold in the month of June, alone, by Sony Corp (ADR) (NYSE:SNE). Nintendo’s dismal performance led to a $46 million loss on the quarter.
The company’s problems weren’t obvious if you looked at NTDOY stock, though. The huge number of downloads of Pokemon Go for iOS and Android caused a rapid rise in the share price. During the first few weeks of July 2016, Nintendo stock shot up over 100%.
Then reality set in. Nintendo released a statement noting that the impact of the mobile game’s popularity to its bottom line would be limited. Realizing that developer Niantic was getting the lion’s share of the Pokemon Go revenue, investors bailed, shaving off 17% in Nintendo stock’s value in one day, and a total of nearly 24% over the course of the week.
Fast Forward to Today
The ball got rolling at the start of the year. The Wii U was discontinued in January, putting an end to the disappointing chapter in Nintendo console history. That same month, NTDOY finally announced the Switch launch date and price. Its new hybrid mobile/console game system would be priced at $299.99 and launch in March.
Despite some grumbling about the price — the new console was significantly less powerful than the Xbox One or PS4 yet cost as much or more — Switch was an instant success, quickly becoming scarce on store shelves.
Here it is in late July and in its latest financial report released yesterday, Nintendo says it sold 1.97 million Switch units. That is nine times the rate it was moving Wii U consoles in the same quarter last year. As a result, the company booked an operating profit of $145 million for the quarter. NTDOY stock responded to the good news with a gain of 7.6% on the day.
Is the Momentum in NTDOY Stock Sustainable?
For a change, things are looking up for Nintendo.
Its foray into mobile gaming is proving successful, booking $80.5 million in revenue for the quarter. Apple Inc. (NASDAQ:AAPL) has been promoting the success of Super Mario Run for iOS, and there are more mobile games in the pipeline. Switch has been a runaway hit that has now sold 4.7 million units since its March launch; NTDOY could have actually sold more had there not been shortages caused by manufacturing issues.
Nintendo is forecasting 10 million sales for its fiscal year ending March 2018. The upcoming Switch game lineup also looks strong, a good sign for long-term console sales.
In addition, the company had an unexpected hit in its retro NES Classic Edition mini console, which sold 2.3 million units in the few short months it was available. Next up is the Super NES Classic Edition, which is expected to be a hot holiday gift this year.
NTDOY stock may be nowhere near its 2007 levels, but it has plenty of room to grow and appears to have shaken off the jitters of 2016. If the Nintendo Switch keeps selling at this pace and Super NES Classic Edition is the hit its expected to be, investors should be very happy.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
