Nintendo Stock UNDERRATED??? NTDOY Stock Analysis (7974.T)

MarioKart, Pokemon, Zelda, Super Smash Bros. How much fun is Nintendo games! But should we invest? Find out with my Nintendo Stock Analysis.
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Nintendo’s Place in the Industry
So remember, Nintendo is a gaming producer and a hardware producer. And the hardware part of the business, think the Nintendo Switch Console, makes up a big part of the revenue.
Nintendo’s total sales of Switch hardware and software surged 122% year-over-year last quarter.
Its Switch shipments rose 43% to 3.05 million,
Its total shipments of Switch software also jumped 123% to 5.04 million.

But Nintendo are not releasing a new Switch console this year, whereas rivals Sony and Microsoft have new versions of their Playstation and Xbox coming out before christmas.

So that will obviously help those companies, but I don’t think it will necessarily be a problem for Nintendo.

I think it won’t be a big issue is because
Nintendo produces exclusive games that are made only for their hardware. Its top franchises include;
Mario,
Zelda,
Kirby,
Smash Brothers,
Pokémon,
and Animal Crossing
aren’t available on PCs or other gaming consoles. Therefore, anyone who wants to play those games will need to buy a Switch console.

Nintendo’s ecosystem is sticky, with over 200 million Nintendo accounts created worldwide, and its Switch Online service now has 26 million subscribers.

Longer Term Outlook
The trends in the gaming industry are not going away. The industry continues to grow with the advancement of technology. My thesis around the industry is that as 5G rolls out and more and more powerfully computing continues to give us better experiences, gaming will get better, better as well.
I think it is one of the best industries in the world for the next 10 years, actually I think it is one of the safest industries in the world as well.

All those 200 Million Nintendo user accounts, and the 26 million Switch accounts are still growing. This gives Nintendo opportunities to follow the other companies into a strong subscription based model. The user base is huge, so this gives Nintendo a lot of options.

MarioKart is just a classic, that is still as popular as it was 20 years ago. And think about Pokemon. Pokemon was massive when I was about 10 years old, and it is still a massive franchise.
Can you imagine when virtual reality gets better, and we are running around Celadon City, living the pokemon trainers life!

7974.T or NTDOY?
Now just so we don’t have any confusion, Nintendo is listed on the Japan Stock Exchange under the symbols, 7974.T.
If you have a Saxo Trader Go Account like me, well you can buy directly off the Japanese stock exchange which is the right way to invest here.
But if you don’t have access to the Japanese Stock Market, you can still buy Nintendo through what is called an ADR.
So you might be able to purchase essentially Nintendo shares with the ticker symbol NTDOY.
NTDOY represents 1/8th of a 7974.T Nintendo share.
Honestly, it’s not a big deal which one you buy as they both are pretty liquid. It depends on what your brokerage account allows you to do.

I’d love to hear your thoughts on this investment as I think a lot of people will think Nintendo is a great investment and I am being far too conservative.
Hit subscribe if you enjoyed my analyses and see you in the next video.

28 Comments

  1. John Oosthuizen on May 13, 2021 at 12:48 am

    Hey Andrew, have you looked at Comcast. I am not a technical analyst like yourself, but the share price seems quite low for such an established company. Any thoughts would be helpful.

  2. s f on May 13, 2021 at 12:49 am

    Great analysis . Where can I get those chart ? Thanks

  3. Umer Hakeem on May 13, 2021 at 12:53 am

    Thanks for the vid. I think the essence of valuation of the stock is whether Nintendo will break the cyclicality of the old hardware model. Traditionally with each new Nintendo hardware released the userbase is reset to zero, resulting in a cyclical pattern of growth and fade over the years. Profits follow the same pattern.

    Those who say that the Switch will follow the older consoles with sales waning when the hardware becomes outdated see the stock as overvalued. This relies on Nintendo abandoing the switch and innovating completely new hardware. The company management themselves talk of extending the life of the upcycle (see comments by Doug Bowser) but NOT breaking that. The market seems to take this view currently.

    Those who say Nintendo will break the cycle use incremental upgrading of hardware as the argument for this. This will follow the Apple model. For example, the release of a Switch that is compatible with 4k would be an incremental upgrade or say they make a Switch that is VR compatible. There is NO definite evidence for this. They also use the example of nintendo switch online, mobile game revenue, collaboration with other companies (e,g lego) and the new theme park in Osaka as evidence of nintendo breaking that cyclical model and perhaps leveraging their intellectual property to create more stable income streams. Bear in mind, revenue from these projects is still low compared to Switch software sales. If you believe this side of the argument, the stock is grossly undervalued and will far exceed 5-6% growth in top line.

    This is why this is a difficult company to value because the range of outcomes is extremely wide.

  4. dohmin konoha on May 13, 2021 at 12:58 am

    Nintendo Stock is forming giant cup with handle of long term.

  5. Left Wing on May 13, 2021 at 12:58 am

    Omg 😳 5:00 thts exactly what I have been thinking of. The IPs that Nintendo own are world famous. Lots of growth in VR and AR. Pokémon alone does almost 1 trillion in sales. https://www.titlemax.com/discovery-center/money-finance/the-25-highest-grossing-media-franchises-of-all-time/ ( though the owner ship of Pokémon is pretty complex Nintendo ultimately owns around 33.333% of Pokémon … rest own by GameFreak and creature.

  6. Thomas on May 13, 2021 at 1:00 am

    Living the pokemon life has always been a secret dream of mine. Virtual reality let’s goo!!!

  7. Maria Andersen - Millionaire in 7 years on May 13, 2021 at 1:07 am

    Cool😃

  8. M. V. on May 13, 2021 at 1:10 am

    Great video, thanks for the analysis, I see a lot of potential for Nintendo. Regarding the 20% discount you used, I think is a bit too conservative. If you consider the Capital Asset Pricing Model (CAPM) and assume a risk-free rate of 2% (5-year treasury bond of US) and a risk-premium of 10%, the discount rate should be 12% (leveraged beta of Nintendo is 1.01)… I understand your concern about being conservative and use higher values for the discount rate, but I’d use the higher values for cases where the risk-free rate is too high to encourage investing in stocks. I also like being conservative, but for that, I consider different scenarios in my DCF analysis. Thanks again.

  9. The Icelandic Investor on May 13, 2021 at 1:14 am

    Great analysis, love this series on gaming stocks 😀

  10. Jagadeesh Immadi on May 13, 2021 at 1:18 am

    Do you follow any strategy to decide how much quantity to buy in any one company?

  11. DiggingNorway on May 13, 2021 at 1:20 am

    If one buys in the US over the OTC Foreign exchange, will one only receive 1/8 of the dividends per share?

  12. Amitha Chandima on May 13, 2021 at 1:22 am

    Nintando 64 is the turning point.

  13. Jason North on May 13, 2021 at 1:23 am

    Great analysis… but I doubt you’re getting NTDOY at $36 or $40 USD…

  14. Dylan Bihler on May 13, 2021 at 1:23 am

    I own Nintendo Microsoft and sony stock

  15. Andrew Letendre on May 13, 2021 at 1:23 am

    Nice! Several members in my Facebook Group wanted me to cover the video game sector… I’ll just make a post with all of your gaming analysis’ attached… Will save me the time and perfectly explained haha 👍

  16. Mystix Fn on May 13, 2021 at 1:23 am

    Hi I’m new to the channel love the video so clear. I was wondering where you got all the charts

  17. Raj Sharma on May 13, 2021 at 1:27 am

    Great analysis ..I bought Nintendo when it was 60 and have never seen it down since them ..They are having a great run with Switch and will continue for sometime

  18. Coooley on May 13, 2021 at 1:27 am

    Great video, man. I’m curious about their quarter 2 results. EPS of $895 per share? Assuming we’d need 8 shares on the american stock exchange, that’s still selling at significantly below EPS. Can you help us understand why that’s the case?

  19. Rekke on May 13, 2021 at 1:28 am

    Great video thank you

  20. Yuki C. on May 13, 2021 at 1:29 am

    Just a random japanese guy passing by. Your Japanese was perfect! Anyways, really great analysis. I agree on long term investing for Nintendo, but bit tricky for stock newbie I think.

  21. Paul Lafita on May 13, 2021 at 1:30 am

    Loved the video Andrew. Your position with Nintendo is pretty much aligned with my previous comment. I’m currently at an average price of 44 on NTDOY. I gave it a little less margin of safety because of the Luigi Mansion franchise and Metroid ;).

    By the way, hard put our emotions aside when you’ve got a cute Pokemon on whiteboard. You can draw, too!

    Cheers

  22. Christopher on May 13, 2021 at 1:35 am

    Appreciate the analysis!

  23. Mya Parker on May 13, 2021 at 1:38 am

    😃

  24. Michael Day on May 13, 2021 at 1:39 am

    The industry is changing — console cycle will be pushed out further. Nintendo will not be releasing a new console for a really long time. They will ride the Switch platform for years. They have just begun to implement subscription services, which is what caused Activision and EA to explode over the last 10 yrs. Biggest risk factor is it being a Japanese Company — Japan incurred a 20 yr recession. I would like Nintendo to be slightly more risk-on — their cash position is absolutely ridiculously high when you compare it to their total liabilities. I view them as a "slow growth" company instead of a pure growth stock.

  25. Martin Sandrieser on May 13, 2021 at 1:40 am

    Thanks for the vid but 2 points. The TTM FCF for 2021 is close to 5 Billion USD, you are showing 5 Billion not before year 6. And then i would see the perpetual value a bit different. The multiple of 15 is the current one. But applying this to the perpetual CF without a growing rate would mean the company is not growing anymore after year 10….so by just applying 2% growth, we would come to a perpetual discount rate of (i-g) -> (100/15 = 6,6 percent minus a growth rate of 2 percent equals 4,6 percent which is (100/4,6) a multiple for perpetual value of 22 then.
    With this assumptions you would come to actual undervalued stock currently, which i personally would say it is.

    Just my thoughts, really like your content, was just trying to put some thoughts in here.

    BR

  26. Jason Johnson on May 13, 2021 at 1:40 am

    The pe is 16. Great financials and growth. Has a moat and as for now a monopoly on hand held consoles. Has to be a great buy

  27. Dylan Bihler on May 13, 2021 at 1:41 am

    There’s not a damn person on this planet that actually plays EA games and likes EA, they just have alot of exclusive rights to things and when they lose those they will tank, I’d give my money to any other company given the chance

  28. Scott Gouldsbrough on May 13, 2021 at 1:43 am

    Loving your channel 🙂 what are your thoughts on Facebook entering the gaming market especially with VR, with affordable hardware and their in house games like Population 1 which is growing like Fortnite. I see a bright future there as VR becomes more accessible. What are your thoughts?

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