Nintendo Stock Buy Or Sell
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Nintendo's (NTDOY -1.43%) stock price is down roughly 15% over the past 12 months as investors fret over its decelerating growth in a post-lockdown market. The chip shortage exacerbated that pain by throttling its shipments of new Switches.
But on Sept. 13, Nintendo's stock popped on two positive developments. First, its sales of Splatoon 3 topped 3.45 million units within its first three days in Japan, a new domestic record for a Switch game. Second, the company held its latest Nintendo Direct presentation online.
Many of those games won't arrive until next year, but that clearer roadmap generated some much-needed buzz for Nintendo's sluggish stock. Should investors buy some shares of the Japanese gaming giant before those games arrive
In fiscal 2020 (which ended in March of that year), Nintendo's revenue and net profit rose 9% and 33%, respectively. But in fiscal 2021, its revenue and net profit soared 34% and 86%, respectively, as stay-at-home trends throughout the pandemic lifted its hardware and software sales. One major catalyst was Animal Crossing: New Horizons, a casual multiplayer game that evolved into a major social platform during the pandemic. Nintendo has shipped 39.4 million units of New Horizons since its launch in March 2020, which makes it the Switch's best-selling game so far.
Lastly, the gaming market remains heavily exposed to inflation and other macroeconomic headwinds. If consumers have less money to spend on discretionary purchases, Nintendo will inevitably sell fewer consoles and games.
Nintendo's stock trades at just 15 times forward earnings and pays a forward dividend yield of 3.3%. That low valuation and high yield should limit its downside potential, but there also aren't any near-term catalysts for its business. Nintendo stock might be worth nibbling on right now -- especially if it regains its mojo with big new games like Tears of the Kingdom -- but it still doesn't stand out against other blue chip tech stocks that also provide value, safety, and income in this challenging market.
Nintendo's (NTDOY -1.43%) stock price dipped 3% on Feb. 8 after the Japanese gaming giant posted its latest earnings report. In the first nine months of fiscal 2023 (which ended on Dec. 31), its net sales declined 2% year over year, its operating profit fell 13%, and its net profit dropped 6%.
That guidance cut, which it blamed on softer Switch sales and currency headwinds, was disappointing because many investors had expected Nintendo to raise its guidance after Pokémon Scarlet and Pokémon Violet made history as its two fastest-selling games ever last November. So is it time to give up on Nintendo, or will its prospects brighten by the end of 2023
For now, Nintendo will need to focus on selling more games to its existing Switch owners. With the exception of Pokémon Scarlet, Pokémon Violet, and Splatoon 3, it was a relatively sluggish year for Switch games.
The five best-selling Switch games in the world at the end of 2022 were still Mario Kart 8 Deluxe (2017), Animal Crossing: New Horizons (2020), Super Smash Bros. Ultimate (2018), The Legend of Zelda: Breath of the Wild (2017), and Pokémon Sword and Shield (2019). The lack of newer games in those top rankings suggests that Nintendo will need to launch some big blockbuster games to get gamers excited about the Switch again.
Nintendo's low valuation and high forward dividend yield of 3.6% should limit its downside potential, but the lack of news about a new gaming console could also cap its near-term gains. So unless Nintendo pulls a rabbit out of the hat later this year, I'd expect its stock to trade sideways and remain a safe haven for value-oriented investors instead of growth-oriented ones.
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The maker of the popular Switch video game console just posted its earnings for the last three months of 2022. Forward guidance disappointed the investing community, causing the stock to slip by around 10% in the following days. The shares are down 20% over the last 12 months, underperforming the broad S&P 500 index over that same time period.
Nintendo fiscal 2023 ends this March. The company's earnings looked fairly solid through the first nine months. Operating profit was $3 billion, down around 13% from the same period in 2021. A slight decline in profitability is not a huge deal considering that the Switch is coming out of its peak sales period. That is just how the gaming industry works -- earnings cyclicality is a feature, not a bug, especially for companies that sell gaming hardware like Nintendo.
As a shareholder of Nintendo, this does not concern me one bit, because I know that Nintendo always plays the long game with its business strategy. In fact, there are multiple initiatives the company has done or is working on that I believe will smooth out earnings and lead to higher annual earnings for Nintendo this decade, even if 2023 is not a record year. At a current price-to-earnings (P/E) ratio of just 13.5, the stock looks very cheap if this turns out to be true.
With more recurring revenue, the expansion outside of video games, and the addition of legacy titles, I think Nintendo's future earnings will be much more stable as it moves from one console to the next. At its current price, the stock looks like a buy for people aiming to hold for many years.
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Zacks' proprietary data indicates that Nintendo Co. is currently rated as a Zacks Rank 4 and we are expecting a below average return from the NTDOY shares relative to the market in the next few months. In addition, Nintendo Co. has a VGM Score of C (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Valuation metrics show that Nintendo Co. may be overvalued. Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of NTDOY, demonstrate its potential to underperform the market. It currently has a Growth Score of A. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of B.
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