Wii U: What Matters Most For Nintendo

Since launching its new console, Nintendo (NTDOY) confirmed that it sold 400,000 Wii U consoles. The original Wii sold 300,000 units during Black Friday. Sony (SNE) fared better. The Playstation 3 maker sold 525,000 units during the week of Black Friday, along with 160,000 Vitas. There are currently 70 million PS3 sold worldwide, cumulatively. Microsoft (MSFT) sold 750,000 Xbox 360 consoles during the Black Friday weekend, and 960,000 for the week.

At the end of last week, Nintendo shares sold off, continuing the profit taking after peaking at $17.63 on October 5 2012:

Analysis:

Investors will need to look for sales to remain steady for Nintendo’s new console. The company has created an advantage for itself by pushing innovation for the gaming experience, ahead of Sony and Microsoft. Budget-conscious consumers are price-sensitive. A discounted Xbox or Playstation that dubs as an entertainment centre will hurt Nintendo. Nintendo released a Wii mini (only available in Canada) for $99, which should help the company remain competitive even in the budget segment of the market.

Game sales will also be important. Nintendo is taking a loss on every Wii U unit sale. The low price for the 3DS and the original Wii should help sustain game sales for the older console.

Business Section: Investing Ideas

Nintendo is a pure-play console play for investors, while Sony and Microsoft have more diversified businesses.

1. Nintendo Co ( NTDOY, Earnings, Analysts, Financials): Mainly engaged in the development, manufacture and sale of entertainment products in home entertainment field. Market cap at $16.6B, most recent closing price at $14.95.

 

2. Sony Corporation ( SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $9.73B, most recent closing price at $9.69.

 

3. Microsoft Corporation ( MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $222.45B, most recent closing price at $26.43.

 

Game makers to add to a watch list include these companies:

 

4. Take-Two Interactive Software Inc. ( TTWO, Earnings, Analysts, Financials): Develops, and distributes interactive entertainment software, hardware, and accessories worldwide. Market cap at $1.12B, most recent closing price at $12.34.

 

5. Activision Blizzard, Inc. ( ATVI, Earnings, Analysts, Financials): Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Market cap at $12.58B, most recent closing price at $11.31.

 

6. Electronic Arts Inc. ( EA, Earnings, Analysts, Financials): Develops, markets, publishes, and distributes game software and content for video game consoles, personal computers, mobile phones, tablets and electronic readers, hand held game players, and the Internet. Market cap at $4.43B, most recent closing price at $14.53.

 

 

Compare changes in analyst ratings for these stocks over the past two years. Note that analysts seem optimistic on these names, with the exception of Nintendo. Will the company prove them wrong in the end?

Written by Chris Lau .  Disclosure: Author owns shares in EA.

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