At this point in the current year, it is evident that the coronavirus pandemic has been an important factor in the increase in profits for different entertainment options, such as platforms for the transmission of series, movies and music. Video games have not been left behind as they have become one of the biggest beneficiaries. So it is not surprising that while waiting for a cure against the COVID-19 virus there has been an upturn in the sale of video games.
Such is the case of the Japanese company NINTENDO (NTDOY) that for the earnings report of August 6 already showed an increase of 428%, to 1,379.10 million dollars, due to the players in confinement. Thanks to extensive investment in research and development, popular demand for the Switch console in its fourth year since its launch has more than doubled to $3.412.01 million, a 108% increase compared to last year, demonstrating that digital sales software accounts for 56% of NINTENDO’s total revenue
Compared to the expenses that range from 632 million in 2019 and 603 million in 2018, an abnormality is noted in the current year where it is estimated that expenses have reached 775 million dollars which includes both development of hardware and software and tools created for its development, showing an increase of 122%.
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Some of the products included in these figures are games such as Pokémon Sword and Pokémon Shield with 17.37 million copies sold between them, Ring Fit Adventure with 4 million copies sold and Animal Crossing: New Horizons with 11.77 million copies sold, consolidating as the best launch of a Switch game.
While the momentum of the coronavirus has shown incredible increases for the video game company, it is important to remember that this phenomenon is usually transitory; that’s why investors looking for stocks ready to beat in earnings season look to NINTENDO for an opportunity because the most accurate estimate for the current quarter is $0.60 EPS for NTDOY, giving it an EPS of earnings of +44.58%, under the consensus estimate of $0.42 EPS.
https://www.zacks.com/stock/chart/NTDOY/price-eps-surprise?icid=chart-NTDOY-price-eps-surprise
With an expanding market in games, stable intellectual property and a new cycle of consoles, they combine to suggest that revenue should grow well over the next several years, with margins ensuring that Nintendo (NTDOY) shares have gained 34% so far this year. There is a $72 billion market cap stock with a share price of $69.
It is important to note that Nintendo’s profit for 2021 is listed on the stock market at 20.6 times current prices, below the average of 21.6 times for the industry in which other brands such as Activision Bizzard , Electronic Arts , Sony and Ubisoft participate. The boost in the growth of the Japanese company will be reflected in the sale of consoles, their accessories and subscriptions for content, while also seeing an opportunity in the increase of income from live services with the intention of taking advantage of the increase in online games and the phenomenon of streaming on the Twitch platform.
In summary, the company earned $3.33 billion during the quarter, compared to analysts’ estimates of around $2.04 billion. Nintendo has generated earnings of $2.49 per share over the last year and currently has a price/earnings ratio of 20.7. Although the basic annual EPS of the company was $0.002B, an increase of 6.27% with respect to the year 2019, and the annual income was $12.038, an increase of 11.41% with respect to the year 2019, the EPS estimate is 0.90 and the estimated income is 3.11B in advance of the new publication of earnings on November 5, 2020.
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Aldo Weidner Zapien
Market Analyst – HF Educational Office – Mexico
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