Nintendo Is Still A Great Buy Amid Stocks Drop

Nintendo has been doing really well in the stock market until recently as investors realize that Nintendo does not own Pokemon. The 32 percent increase in stocks in the previous rally saw a reveral that put Nintendo down in its biggest decline since October 1990.

Nintendo only owns 32 perceent of the Pokemon Company, the owners of the Pokemon brand, and the licensing rights to the world-wide sensation game, Pokemon Go. The income that the company will have from the popularity of Pokemon Go will be, according to Nintendo's first quarter results, limited, and that their earnings outlook will not be revised anytime soon.

Some markets, however, believe that Pokemon's popularity would be key to the company's earnings as it was still too early since the Pokemon game's release. They added that the company had few expectations of upward revisions to its profit targets because of the timing of the result's release.

"The market has overreacted to the Nintendo statement," said David Gibson, a senior analyst at Macquarie Securities Group. "I believe that Pokemon GO will be material in the company's earnings given the current trends for the game." 

Nintendo is experiencing a huge buy volume of its shares even as stocks fell on Monday. It was still as high as 60 percent in comparion with the time the game was first launched on July 6 in the United States, Australia and New Zealand, which added about $12 billion in terms of market value.

The increase in share prices was still too small of Yasuo Sakuma, portfolio manager at Bayview Asset Management seeing the potential of Pokemon Go's earnings on the company, as well as other games as soon as Nintendo goes deeper into the mobile gaming indistry.

"Nintendo is well-placed to boost its earnings with its other characters, such as Super Mario and Zelda and their potential is unknown," he said. 

Moreover, impact on earnings from Pokemon Go is also compounded by the fact that Nintendo has an undisclosed stake on the game developer, Niantic. There is also the accessory called the Pokemon Go Plus, which is a hardware accessory that players will be buying so they don't have to look at their smartphones. However, Nintendo advised that sales of the device has also been factoried into their forecasts.

Nintendo is expeting a 37 percent increase in operating profit to bring the total up to 45 billion yen ($425 million) in the year until March 2017. Also factored in is the strong yen that cuts into the company's earnings overseas.