Per media reports, Nintendo Co Ltd (T:) (OTC:) is set to unveil its third smartphone game (both iOS and Android) namely Animal Crossing – Pocket Camp this November end. Two of its other games launched for the mobile platform include Super Mario Run and Fire Emblem Heroes.
It is free-to-play game and the company looks to make money through in-game transactions. Analysts observe this game to be Nintendo’s big bet in the mobile gaming space.
Bloomberg quoted a Goldman Sachs Group Inc (NYSE:) analyst saying that Nintendo could earn double the revenues than the total collective sales of its earlier two mobile games. Meanwhile, a Citigroup (NYSE:) analyst estimated in April that (assuming the game will have 18 million users) the game could generate 4 billion yen in sales in the current fiscal year.
Nintendo Co. Price
Nintendo Co. Price | Nintendo Co. Quote
After remaining aloof for quite some time now, Nintendo has been focusing on growing its footprint in the smartphone games arena. 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.
Video games will generate a whopping $108.9 billion in revenues in 2017, up 7.8% year over year, per the latest report from Newzoo. Mobile games revenues will grow 19% to $46.1 billion, representing 42% of the total revenue. By 2020, more than 50% of the revenues will come from mobile games.
Pokémon Go’s success gave it the much needed impetus. Though the success of the game didn’t directly benefit Nintendo’s financials, we believe that it has strengthened the Japanese video game publisher’s position in the lucrative mobile games space. It was created by Niantic in association with Nintendo. Consequently, most of the benefit was netted by Niantic.
Nintendo launched the first game in the Animal Crossing franchise in 2001. It is a game in which players move to villages and live with the animals (anthropomorphic) and carry out a variety of tasks. The game has garnered a positive response and reportedly has sold over 30 million copies (4 major games and 2 spin off games).
Currently, Nintendo carries a Zacks Rank #1 (Strong Buy). We note that Nintendo has massively outperformed the industry in the past year. While the stock has returned 87.7%, the industry gained 45.1%.
Key Picks
Other stocks worth considering in the video game space include Take-Two Interactive Software, Inc (NASDAQ:) , Electronic Arts Inc (NASDAQ:) and Glu Mobile Inc. (NASDAQ:) . Take-Two sports a Zacks Rank #1 while Electronic Arts and Glu Mobile carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Take Two, Electronic Arts and Glu Mobile is currently projected to be 14%, 16.5% and 15%, respectively.
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