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Zack’s Bull of the Day: Nintendo

While interest rates and energy look to dominate the headlines in 2015, another top story for the year looks to be the rising fortunes for the consumer sector. Lower oil prices, rising home values, and a better jobs situation all look to combine to make consumers feel more confident in their economic situations, and thus more likely to spend as well.

These trends look to make for a great year for the video game space, as this ultra-discretionary industry was already seeing a solid growth track, even with the previous lackluster economic environment. After all, the video game world has been growing at a rate roughly four times as fast as the U.S. economy, and with a better economic environment it seems reasonable to assume that the trend will continue this year as well.

Fortunately for investors, there are a number of choices in the video game space, and most of which appear to be interesting plays for 2015, thanks to a high industry rank for the segment. However, arguably the best way to tap into this growth potential is by taking a closer look at one of the leaders in the video game industry, Nintendo (OTC:NTDOY).

Nintendo in Focus

Nintendo is probably best known for its lineup of great characters and titles which are among the longest running franchises in the video game world. These include ultra-popular names like Mario, Pokémon or the Legend of Zelda series, titles which generally accompany any of the company’s latest system releases.

The company also made a huge splash a few years ago with the launch of its novel platform, the Wii. This console relied on controllers that sensed motion and it was a huge hit for NTDOY, becoming the best selling console for the company in its history.

The company decided to follow up the Wii with the Wii U in 2012, though this has seen much less interest when compared to its predecessor. Sales haven’t been great for the software either, putting Nintendo in a precarious position when compared to the successes of its main competitors, Sony and Microsoft.

Thanks to these sluggish sales, NTDOY stock has been a recent underperformer. Shares of the company are basically flat over the past two years, easily trailing broad benchmarks in the process. However, as we start the New Year, things are looking up for Nintendo and this could be a turnaround time for the company.

Better Days Ahead?

Nintendo is starting to see sales for its consoles and games perk up, and this is largely thanks to some very popular titles. The latest Mario Kart and Super Smash Bros. are drawing more interest into the Wii U platform, and are continuing their popularity from previous editions from old systems.

2015 looks to continue this trend of popular game franchises and this could really drive sales for the Wii U and software in the next few months. Coming ahead are titles such as Mario Party 10, Star Fox, and the Legend of Zelda, and these look likely to pull in more gamers into the Wii U ecosystem, potentially making this year an exceptional one for NTDOY.

Analysts agree with this sentiment too, as they have been furiously raising estimates as of late in anticipation of a solid year ahead for NTDOY. In fact, analysts are looking for EPS growth of 268% for 2015 and a move back to profitability as well.

Estimates (for the full 2015 period) have actually moved from a 13 cent loss per share 90 days ago, to an eight cent gain 30 days ago, to their current impressive level at 27 cents a share today. Investors have also seen a positive trend for the next year time frame too, suggesting that Nintendo is starting to get on the right track.

The company is also crushing estimates at earnings season so there should be little worry about NTDOY meeting lofty expectations. NTDOY has actually beaten estimates by an average of 436% in the past four quarters, including an 800% beat in the previous quarter.







Bottom Line


Thanks to the impressive turnaround potential at Nintendo and the strong earnings estimate revisions we are seeing for the stock right now, we have given NTDOY a Zacks Rank #1 (Strong Buy), and are looking for outperformance ahead for the stock. It also doesn’t hurt that NTDOY finds itself in a very highly ranked industry, suggesting that the broader trend is this stock’s friend right now too.

So if you are looking for a way to play the consumer sector that isn’t already bid up to extreme heights, make sure to consider Nintendo. The company is poised to release a number of historically popular titles within the next few months and this could provide the stock with the boost it needs to finally get out of the doldrums and become a top performer once more.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, blogger Zacks Investment Research has a total average return of 1.0% and a 49% success rate. Zacks Investment Research is Ranked #1336 out of 4092 Bloggers Bloggers


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