Morningstar | Switch Shipment Momentum Reaccelerated by Pokemon and Super Smash Bros; Nintendo Shares Undervalued
We believe that Nintendo’s policy change in 2014 may offer the firm a new growth opportunity, through not limiting its popular characters to game consoles, but expanding them to other platforms--such as launching smartphone games, allowing Universal Studios to use its characters, and selling figurines.Super Mario Bros., released in 1983, features one of the most popular game heroes in the world. Over the past decade, eight Super Mario games, four Mario Kart games, and 20 other Mario games (such as Mario Party and Mario Tennis Open) have recorded more than a million sales on various platforms. Super Mario Run, the first Mario game to be launched on smartphones, recorded more than 200 million downloads, in fact. Moreover, Shinzo Abe, the prime minister of Japan, dressed up as Super Mario at the closing ceremony of the Rio Olympics. Thus, we believe that Mario is not only a game character, but also a symbol of Japanese entertainment.Another of Nintendo’s most popular franchises is Pokemon, with the first Pokemon games released in 1996. Over the past decade, 16 Pokemon games have recorded more than a million sales, representing a killer application on multiple platforms. Pokemon Go has provided a new user experience through augmented reality, or AR, and recorded more than 800 million downloads. Pokemon Go has also attained five Guinness World Records for revenue and download numbers.We believe that Nintendo’s fans will increase as people are able to play Nintendo characters on varied occasions and on many more platforms. However, we are still uncertain whether the company can improve its profitability, which is determined by: 1) whether shipment numbers for the Nintendo Switch, the new game console launched in March 2017, can replicate the success of Wii; 2) whether Nintendo can manage the cost of the Switch and provide it at an affordable price point; and 3) whether the company can increase smartphone revenue without damaging its game console business.Nintendo is mainly engaged in the development, manufacture, and sale of home-use game hardware/software and peripheral equipment as well as software under the name of "Nintendo DS," "Nintendo 3DS," "Game Boy," "Nintendo 64,"" Game Boy Advance," "Wii," "Nintendo GameCube," "Game Boy Color" and "e-Reader (trading card games)." Co.'s principal software trademarks include "Pokemon," "Super Mario Bros.," "The Legend of Zelda," "STARFOX64" and others. Co. also provides online games and repair services. In addition, Co. is involved in the manufacture and sale of Japanese playing cards called "Karuta," playing cards and board games, as well as the management of intellectual property rights.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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