Pokemon Go Craze Seen As $3B Boon For Apple

In a note to investors this morning, Needham analyst Laura Martin said she estimates that Apple may generate $3B of incremental revenue from Pokemon Go...
By The Fly Staff ,

In a note to investors this morning, Needham analyst Laura Martin said she estimates that Apple (AAPL) - Get Report may generate $3B of incremental revenue from Pokemon Go, which would be more than what was added with Candy Crush in 2013 and 2014. Nintendo (NTDOY) and Niantic's incredibly successful augmented reality game is already available in 35 countries, but its launch in Japan scheduled for today was postponed following an email leak, reports indicate.

BOOST FOR APPLE: Needham's Martin estimates Apple could generate $3B of incremental "high-margin" revenue from Nintendo and Niantic's Pokemon Go over the next 12-24 months. Martin believes the game underscores two underappreciated investment qualities of Apple, namely that it is "THE global distribution platform" for mobile content winners, not just Pokemon Go, and that it is likely to keep 30% of Pokemon Go's revenue spent on iOS devices, suggesting upside to earnings. The analyst noted that King Digital's Candy Crush, the biggest mobile game before Pokemon Go, generated revenue over $1B in each of 2013 and 2014, based on a 2% ratio of paying users to total users. Nintendo's game conversion rate is 20% in the U.S. so far, she added. Since Pokemon Go was introduced in the U.S., Apple's market capitalization rose by $2B between July 6 and July 18, while Nintendo's saw a $20B rise, Martin told investors.

JAPAN LAUNCH: Today's scheduled launch of Nintendo's augmented reality game has been postponed in Japan, the original home of Pokemon, according to a report from TechCrunch. The decision follows an email leak from McDonalds (MCD) - Get Report Japan, which is the game's sponsor, detailing the launch of the game, the publication said. The companies behind Pokemon Go were concerned that the hype created by the news would overload the game, the report added. In a previous report by Forbes, Niantic CEO John Hanke had highlighted the need to improve server capacity. "We are working hard with our partners in Japan to enable the servers to keep up with demand once the game goes online there," he said.

WHAT'S NOTABLE: King Digital, the maker of Candy Crush and other games in the "Candy" series, was acquired by Activision Blizzard (ATVI) - Get Report for $5.9B.

PRICE ACTION: In morning trading, Apple is fractionally higher to trade near $100 per share, while shares of Nintendo ADRs trading in New York have dropped almost 10% following the launch delay in Japan. Even with today's pullback, Nintendo shares trading in New York are up about 85% since the launch of Pokemon Go in the U.S.

Reporting by Jessica de Sa-Mota.

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