A long-standing manufacturer of gaming consoles and titles, Nintendo (OTCMKTS:NTDOY) has a firm foothold in a highly lucrative sector. With the holiday season approaching in 2020’s fourth quarter, it’s time to consider buying Nintendo stock in anticipation of stocking-stuffer gains.
Gaming is one of the handful of market sectors that didn’t buckle under the weight of the novel coronavirus. If anything, stay-at-home mandates bolstered the video game industry as people sought entertainment modalities that didn’t involve venturing outside.
As we embark upon the fourth quarter, the economy isn’t great but undoubtedly people will continue to spend money. If America’s most popular holiday tradition is spending money, then 2020 should be no exception to the rule.
This, however, begs the question of whether folks will choose to spend their hard-earned capital on Nintendo’s gaming offerings. If so, then Nintendo stock would qualify as a must-own in the run-up to America’s frenetic holiday season.
A Closer Look at Nintendo Stock
Speaking of run-ups, there’s no denying that Nintendo stock holders have enjoyed the bull run of 2020. Sure, there was a dip in March due to the onset of the coronavirus. Yet, that was a brief dip followed by sustained gains.
The repeating pattern in Nintendo stock is a move upwards followed by a sideways period of consolidation. This is normal as markets must digest their gains from time to time.
Throughout September and the first half of October, Nintendo stock marked a sideways consolidation/digestion period. This could easily be a setup for another leg up.
At this point, I should also mention that Nintendo stock offers a pretty decent forward annual dividend yield of 2.76%. Therefore, sideways price action isn’t such a terrible thing as long-term investors can collect dividend distributions along the way.
Gaming Goes Mainstream
Sometimes traders are so focused on Sony’s (NYSE:SNE) PS5 and Microsoft’s (NASDAQ:MSFT) Xbox X and S Series that they seemingly forget that Nintendo exists.
That, I believe, is a mistake. In fact, an argument could be made that the Nintendo Switch gaming console remains extremely popular. Perhaps it just doesn’t receive as much attention and buzz among stock traders.
With this in mind, analytic firm Ensemble Capital concisely summed up the value proposition of Nintendo stock. “The company’s Switch video game console is not new, yet demand is so strong that the company’s main struggle has been trying to keep up with demand,” the firm explained.
Ensemble Capital even pegged the Nintendo Switch as a contributing factor that would “accelerate the mainstreaming of video games as a form of family entertainment” during 2020’s shelter-in-place scenario. With the holiday season approaching, it’s interesting to consider that the Switch could actually bring families closer together while generating revenues for Nintendo.
Die-Hard Fans
If you thought that Ensemble Capital’s commentary on the Nintendo Switch was insightful, you’ll definitely appreciate what Epyllion Industries managing partner Matthew Ball had to say about it.
“Nintendo’s games are more popular than they’ve ever been and they’re also as creatively inspired as ever. There is no foreseeable future without millions of die-hard Nintendo fans,” Ball asserted.
This conjures up an image of an army of ultra-loyal Switch users storming retail stores (online or in person) this holiday season. It’s a frightening image, perhaps, unless you’re a Nintendo stock holder.
Ball envisions legions of gamers glued to their Switch screens, playing the latest versions of Roblox, Minecraft, Fortnite and Grand Theft Auto. It’s not an unrealistic vision as Nintendo’s paid online accounts have totaled 26 million members. That’s a whopping 73% increase since January.
The Bottom Line
There’s absolutely no need for Nintendo stock investors to fear the PS5 or the Xbox. The popularity of the Nintendo Switch should endure and could even grow during 2020’s highly unusual yet supremely lucrative holiday season.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
