Is This Forgotten Stock Heating Up The Video Game War?

Todays top stocks to buyWhile Xbox and Playstation dominated the gaming headlines for the better part of the last decade, the latest generation of consoles is back to a 3-way race — as an old favorite switches on the after-burners…

Nintendo (OCTMKTS:NTDOY) is back. And back with a vengeance…

It wasn’t that long ago that its first-generation Wii console created a huge buzz for the Company when it was initially released back in 2006.

The system introduced a revolutionary motion-sensing play experience that responded to physical movement from the player.

But let’s face it…although sales of the Wii and its game titles have been relatively steady over the years, the Nintendo brand more or less stayed in the back seat as it watched Microsoft and Sony nab the lions’ share of media attention.

Not only did the latter two gaming giants go on to develop motion-sensing systems of their own, they’ve gone toe-to-toe with launching games that were graphics and story-heavy, while the Wii had a tendency of keeping their games more age-appropriate.

Furthermore, where Microsoft and Sony were regularly introducing cross-platform games and innovative new titles, Nintendo had a preference for sticking with the classics and gave them makeovers instead.

Nintendo’s strategy did help to ensure that it kept their loyal fan base intact. However, it gave little growth prospects for investors to latch onto. And since the economic downturn, Nintendo has struggled to hold up its shareholder value, which is down to about one-sixth of its 2007 highs.

Not helping its cause is the simple fact that gaming has made a huge shift into smartphone apps.

This has placed the console market in a funk and put more pressure on Nintendo’s stock.

Some say that Nintendo may have lost its relevance, and that we could be seeing the downfall of a video game pioneer that spawned legendary characters such as the Mario Bros., Link, and Donkey Kong.

Yet there will always be some who feel that, like a physical book, video games in the conventional sense can never be fully replaced by the experience now found on smartphones or tablets.

In that regard, while business may be significantly down across the board from a decade ago, the hardware companies are still showing they have some fight left — especially Nintendo.

Around mid-July, findings from GameSpot Gametrax revealed global sales of 6.6 million units in June for Nintendo’s upgraded Wii U console.

Though Wii U’s numbers are well below that of the Sony PS4 (8.6 million units), it’s much higher than Xbox One (4.9 million).

It may be worth noting that Wii U was released about a year earlier than the other two consoles.

Nevertheless, Nintendo reported that Wii U sales were up 233% from June 2013 to June 2014 while its game sales soared 373% in the same span.

Helping with this impressive climb is the recent release of the acclaimed Mario Kart 8, which sold an astounding 885,000 copies in the US in its first five weeks beginning May 30th.

With only a months’ worth of Mario Kart 8 sales reported in time for Q1 ended June 30th, Nintendo was unable to pare down its quarterly net loss of -¥9.92 billion (-US$100 million).

But for the fiscal year to March 31, 2015, Nintendo forecasts a strong recovery.

It’s expecting a 3.2% boost in sales, resulting in a net profit of ¥20.0 billion (US$200 million) and EPS of ¥168.96 (US$1.66).

Now we all know that Nintendo can’t expect to have its entire business hinge on the sales figures of just one video game release.

Fortunately, they have a number of first-party games in the pipeline that’s likely going to boost Wii U’s numbers even higher.

The highly anticipated Super Smash Bros. U is slated for late fall, while two titles from the classic Legend of Zelda franchise are likely to be released sometime in 2015.

Then there’s Nintendo’s popular 3DS handheld console that still regularly sells over 30,000 units each week.

Since it was launched in March 2011, Nintendo has sold over 44 million units of Game Boy’s successor.

It too is expected to see a string of notable titles through to the end of the year, including Super Smash Bros, Final Fantasy, Pokemon, and Sonic The Hedgehog.

Final Thoughts

I see Nintendo (OCTMKTS:NTDOY) as a top stock to buy in the gaming sector.

A lack of blockbuster game releases in 2013 may have contributed to Nintendo losing market share to its competitors (not to mention the proliferation of smartphone apps), but if there was ever a comeback hit, Mario Kart 8 was it.

Furthermore, the video game veteran isn’t sitting stationary on this one beacon of light.

It has a few other tricks up its sleeve to ensure that it gets back into the console race and stays relevant.

There’s still plenty of work ahead for Nintendo to make up for the ground it has lost…but it’s far from being game over.

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
Follow me on Google+, Facebook, and Twitter

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