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Nintendo - putting a value on blue sky

I saw a cheeky headline yesterday “Nintendo shares plummet after it points out it doesn’t make Pokémon Go”.

Nintendo’s share price was limit down yesterday after the company released a statement reminding investors that it’s effective economic interest in the company that owns Pokémon Go is just 13%. It also said that it’s not planning to increase its earnings outlook for the financial year ended March 2017. Some upside for Pokémon Go has already been factored in.

Despite the headlines, this should not have been news to stock analysts. The issue is future earnings. To what extent can the intellectual property involved in Pokémon Go be translated into future opportunities involving Nintendo characters? Super Mario is limbering up. The company is currently trading on 91 times consensus earnings projections for F17. That multiple will require substantial earnings upside in the years beyond F2017.

As recent volatility demonstrates, there is a wide range of opinion on the earnings upside for Nintendo.  Volatility continues. After being limit down yesterday, Nintendo opened lower this morning but is staging a rally as I write. 

Potential chart supports might centre around the 61.8% Fibonacci retracement at 20,750 or the 78.6% retracement and 200 day moving average. The first of these levels is about 11% below yesterday’s close. The second would be disappointing, it would see the stock price pretty much back to where it was before Pokémon Go hit the scene




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