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Nintendo’s plunge into mobile gives shares a new lease of life

Nintendo’s Wii may have been a revolution in the gaming console market back in 2006, but a decade later and the Japanese company is lagging Microsoft and Sony. It has given itself, and its shares, a mighty boost by finally turning its attentions to the mobile gaming market, first with the wildly successful ‘Pokémon Go’ and next with ‘Super Mario Run’.

Japanese flag flying
Source: Bloomberg

There was no doubting the success of the Nintendo Wii, which went on to sell over 100 million units following its launch in 2006. For a time, the Nintendo console for casual gamers left rival consoles from Sony and Microsoft trailing in its wake. It was great news for investors, with shares in the 127 year-old company rallying more than four-fold over the course of 2006 and 2007 to an all-time-high above 70,000 yen.

The spike in the share price was short-lived. The stock plunged along during the height of the financial crisis in 2008, and continued to fall for a further three years as the Sony PlayStation and Microsoft’s Xbox quickly became the dominant consoles in the market. Nintendo’s successor to the Wii, the Wii U, was launched in 2012 and was a relative flop that sold a fraction of the volume of the original Wii console. It had several problems, but the major one was a lack of available games.

At the same time, the popularity of smartphones was soaring, and Nintendo was being urged to launch games for mobiles to meet this demand surge. For a while the company prevaricated, seemingly reluctant to plunge into a world where it wouldn’t control both the hardware and software for its games. But in 2015 it signed a deal with Japanese mobile developer DeNa to bring games to mobiles and tablets. The reaction in its stock price was instantaneous, with the shares rising by almost a quarter in a single session following the announcement.

Its first effort, the social app game ‘Miitomo’, was low-key, but it was swiftly followed by ‘Pokémon Go’, the runaway success of this summer. Nintendo’s share price soared on news of the game’s popularity, more than doubling in the first half of July to hit a peak of 32,700 yen. The success of this game had a halo effect for Nintendo – sales of its already successful handheld console, the 3DS, soared too, and other consoles games like ‘Monster Hunter Generations’ and ‘Minecraft: Wii U Edition’ also performed strongly.

Some of the froth quickly came out of the shares and they traded around 22,000 yen for most of August. Then in early September came a further announcement that seemingly confirmed Nintendo’s commitment to the mobile gaming market: the company would bring its popular Mario character to smartphones through the new game ‘Super Mario Run’. It was actually revealed at Apple’s launch of its new iPhone 7 and will be available in the App Store first. The shares surged once more, and they’re currently trading at over 25,000 yen.

The question now is whether ‘Super Mario Run’ will be a success. The gaming market is incredibly fluid and fickle, and mobile gaming more so than the console games market. History is littered with one-off successes like Rovio’s ‘Angry Birds’, and even the popularity of ‘Pokémon Go’ seems to be waning. However, Nintendo has history on its side. Its Mario character is enduringly popular, and the success of its latest incarnation appears guaranteed. Following that, Nintendo has a huge back catalogue of popular games and characters that it could reboot for mobile, potentially producing a run of hits. It also, for now, has the backing of Apple which will be just as keen to see it succeed. There’s no guarantee of course, but the combined power of Mario and Apple will help.

Nintendo also isn’t giving up on the consoles market. Its handhelds remain popular, and it’s going to have another shot at the consoles market with its forthcoming Nintendo NX that’s set to be launched in March 2017. It still has very tough competition in this market – Sony is just bringing out  new slim and ‘Pro’ versions of the PlayStation 4, while Microsoft recently re-engineered the Xbox One S to support 4K video. If the reports currently circulating the tech blogs are to be believed, Nintendo won’t go head-to-head with Sony and Microsoft but is planning an affordable cartridge-based console-handheld hybrid that it wants to be unique and mobile. That could make the new device a tough sell, but Nintendo says it has learnt the lessons of its Wii U failure and will do better in helping gamers understand what’s unique about the system and in providing a much better lineup of games.

Investors will be watching closely.

Denne informasjonen er utarbeidet av IG, forretningsnavnet til IG Markets Limited. I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Denne informasjonen er ikke utarbeidet i samsvar med regelverket for investeringsanalyser, så derfor er denne informasjonen ansett å være markedsføringsmateriale. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder. Se fullstendig disclaimer og kvartalsvis oppsummering.

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