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Nintendo share price: 3 key takeaways from shareholders AGM

Nintendo’s share price is up a huge 40% this year, but it is a volatile stock, prone to large shifts in price, sometimes in a single day.

Delays to video game releases or missed sales figures have all been enough for investors to suddenly hit the stock’s reset button this year.

Yet, at Friday's 79th annual general meeting, shareholders gave President Shuntaro Furukawa a vote of confidence with a 96.5% approval rating.

In the AGM's Q&A, Furukawa and his executive team hinted at developments designed to keep growth mushrooming at Nintendo [NTDOY]. For traders, these will either make or break the share price in the second half of 2019.

 

Strong pipeline of games

Nintendo's 1.75 beta rating shows that the stock is more volatile than most. Partly this is down to the gaming sector’s need to keep releasing triple-A games to keep gamers, and investors, interested.

June saw Nintendo's share price dive after news that the long-awaited Animal Crossing sequel is delayed until 2020 and that gamers will have to wait a little longer for a new version of the Nintendo Switch.

Nintendo announced all this on Youtube in a video that coincided with the company's keynote at the E3 games expo in LA. Not helping things was a lack of detail on a new streaming service and the conspicuous absence of any update on hit game, Metroid Prime.

At last week’s AGM, Shinya Takahashi, a senior executive at Nintendo, highlighted upcoming titles Pokémon Sword and Pokémon Shield and Luigi's Mansion 3 as reasons for shareholder optimism. There is also a sequel to blockbuster Zelda: Breath of the Wild in the offing. Shareholders will be keen to see how these titles perform once they’re released during the current financial year, and beyond.

 

Nintendo enters China

Nintendo’s share price jumped over 14% in a single day on 18 April when news hit of a partnership with Tencent [TCEHY] to sell the Nintendo Switch console in China.

China is a huge opportunity for Nintendo, as Furukawa acknowledged at the AGM. The country is the world's biggest video game market and this is only set to grow.

According to market research company Niko Research, the market is expected to be worth $41.5 billion by 2023. By then, the number of video game players in the country will have reached 767 million.

$41.5billion

Expected market valuation by 2023

  

Serkan Toto, CEO of Kantan Games, explained to CNBC why Nintendo could succeed:

“The game portfolio is totally different from Sony [SNE] and Microsoft [MSFT], which appeal to hardcore gamers — who in China play on the PC. The Switch is a portable device, which fits nicely with Chinese users’ penchant for gaming on the go.”

Breaking into China takes time and, as Furukawa acknowledged in the Q&A, the exact release date for the Switch in the country is unknown. Traders could be well-served to look out for a major move in price once the date is announced.

 

Switch online hits 10 million subscribers 

Nintendo's online service Switch Online has now amassed over 10 million subscribers. But, as one shareholder noted during the AGM’s Q&A, the service might be inexpensive but 'still feels weak' compared to rival offerings.

Furukawa acknowledged that gamers want to access more of the company's beloved back catalogue online. This could include SNES, N64 and Gamecube games. Such a move could provide reasons for nostalgia-loving gamers to pick up a subscription. 

Online is a huge growth area for Nintendo. Last year digital sales came in at 118.8 billion yen, a huge 95.4% increase on a year-on-year basis.  The more subscribers, the more opportunity for monetisation.

Market cap$44.5bn
PE ratio (TTM)32.42
EPS (TTM)1.44
Quarterly revenue growth (YoY)2.3%

Nintendo share price vitals, Yahoo Finance, 8 July 2019
 

Where next?

Analysts have a 50,050 yen consensus price target on the stock, which would represent a 23% upside if hit. Of the 21 analysts following the stock on Yahoo Finance, 17 either rate it a 'Strong buy' or a 'Buy'. The company also has some heavyweight backing, with J.P. Morgan owning 10.74% of stock.

While the AGM didn’t exactly shake the share price - up 0.47% on the day - it did highlight Nintendo’s strategic focus, and on the 30 July, when Nintendo will update the market on its latest quarterly numbers, traders will be given a further indication of where the company’s stock is headed next. Shareholders will be looking for growth in both Nintendo Switch sales and online subscriptions. Any further news, or lack of, on upcoming triple-A titles, China, or a new version of the Switch could see a sudden spike in movement.

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