Just to point out, whether you think the Wii is a fad or not is not that important. What is important is if the market is thinking the Wii is a fad or not.
From the analyst reports I have seen, a lot of them are only forecasting (or at least they were) 20-25 million Wiis globally. These are very low assumptions; however, I think analysts have since realized their is actual demand for the Wii. The problem we need to figure out is how many Wiis is a $38.50 stock price predicting. I am pretty sure the greater market is not sharing the 75.37 million units prediction we are currently trading.
Additionally, it appears the Nintendo page isn't updating the stock price each day.
Thanks for your explanation zukuas. We hold slightly different views when it comes to Wii's future & Nintendo's future. We won't know until years from now what occurs, but I wish you good luck.
I'll try to address all your points and explain why I am long Nintendo (NTDOY). This may be another long post.
First let's talk about the Wii's sales so far and its prospects for long term success. It's obviously going to be hard to definitively show that a console will dominate or be "successful in the long term" when the console has only been released for 6 months. But in my opinion, I don't know how these past 6 months could have gone much better for Nintendo than it already has. I think Iwata and the rest of the Nintendo managment have the right strategy and are doing everything right and it shows in sales, profits, and share price.
The Wii right now is still sold out on very strong demand after selling approximately 6 million units worldwide. There are already 3 Nintendo Wii titles that have gone over the million mark, Zelda, Warioware, and Wii Play. It's four if you want to count Wii Sports. I think this already proves that "Nintendo has shown through games that it will be a powerhouse" and is ready to fully support the Wii with games people want. This is all with the biggest titles still to be released and I feel the best is yet to come.
I also think you are selling a lot of Wii owners and so called "casual gamers" short if you think they'll suddenly forget about their Wii purchase 6-18 months out. The fact is many "hardcore" gamers also have purchased the Wii and as long as there are good games made for the system gamers of all stripes will buy them.
If these past 6 months of success are not enough to convince you and others that it's not just a flash in the pan then no amount of success will and only time and continued outperformance will prove that the Wii is not a fad.
Now I don't think any of the current systems are going away but it's funny how nobody brings up how the PS3 or Xbox 360 might be a "fad" even though it's Sony who got off to a fast start in every market and quickly faded after the first month. Just look at the latest Media-Create numbers, they just reported Japanese sales for Apr 16-Apr 22 and the Wii outsold the PS3 by a ratio of 7:1. 77,913 sold for the Wii versus 11,000 for the PS3 and a paltry 2,307 for the 360.
Let's also touch on the DS. Obviously sales will eventually slow but you can say that about anything. The real question is when will sales slow? Right now the DS is still sold out on a regular basis in Japan and often in short supply here in the US two full years after the original launch. Sales are still accelerating not slowing down. Furthermore your statement that the DS doesn't have a "large amount of good games" is highly subjective. The fact is they have games that sell. I count 25 DS games on VGchartz.com's million shipped lists with a total of 91.2 million units. In contrast there are only 8 games on the million list for the PSP with a total of 11.2 million units.
So far the best reason that anyone can give for the DS or Wii slowing down seems to be because that it eventually it has too. I'll take that as a bullish sign.
We should also talk about NTDOY valuation. Right now I believe the price to earnings ratio for NTDOY is 35. This is no longer cheap compared to the rest of the market but it is still very cheap when compared to other pure video game plays like Electronic Arts (ERTS) which has a P/E of 194 and Activision (ATVI) which currently has a P/E of 77. I feel that of all the pure video game stocks NTDOY has by far the best risk to reward ratio and best prospects for earnings growth especially since Nintendo management has a long history of conservative guidance.
Finally as any technician will tell you don't be afraid of stocks that are at their all time highs. A stock sitting at an all time high is hardly a bearish sign and definitely does not mean it cannot go higher. NTDOY was also at an all time high in January, February, March, and now April. I think it's going to make appearances on the all time high list for a long time to come. I know there's the old Wall St. cliche, buy low, sell high. But you'll soon find out that you can't always catch things at the rock bottom, sometimes you're going to have to buy high and sell higher.
I apologize for the very long post but it's for all these reasons and more I fully expect NTDOY to reach the mid 50's or higher before the end of the year. However for anybody who has read this far please keep in mind that I am not a professional and I am just one amateur trader giving his opinion and as always there is the possibility that I could be completely wrong in my assessment. I encourage everyone to do their own research and would like to wish everyone good luck trading.
Disclosure: As of this posting I am long shares of Nintendo (NTDOY)
I am wondering why you would plan to buy stocks in Nintendo zukuas, for the long term? The info I see is that the stock is at its highest price ever in 40+ years. How much higher can it go? The Wii has not shown that it will be successful in the long term and many think (including me) that it will not do so great in a few years or that it is a fad. Nintendo has not shown through any games that it will become a powerhouse in terms of games for it, and seems to be concentrating on casuals who may stop playing within 6-18 months. The DS has done great, but sales will eventually slow, and it has some good games but not a large amount. Given this info & unpredictability & the fact that Nintendo has shown for 2 previous console generations that they can start off incredibly well but then die in the long term, I don't see why one would invest with such risk and the fact that the stock probably won't see big gains. I'm not trying to debate you, only trying to get your take on your plan.
Just my opinion, but I still think NTDOY is a great buy right now too, particularly if you are a long term investor. I just hope there is a dip so I can buy more.
I don't have much experience going short but I think Electronic Arts (ERTS) is the most dangerous one and a possible candidate for your pair trade. EA so far has not really benefitted from Nintendo's success and have been scrambling to bring Wii development up. At the same time if there is some unexpected industry wide slow down they will be hurt the most. The analysts all seem to like ERTS 18 buys, 11 holds, and only 1 sell.
Although right now I think you might as well just go long Nintendo and forget about shorting. Full disclosure, I am long shares of NTDOY.
CNBC just said Nintendo is a great buy right now, even at its current prices. The analyst cites the superior sales of the Wii and the 144,000 copies of Super Paper Mario sold last week. They are saying this is the right play in the video game industry right now.
Could be interesting to take a long Nintendo short Sony play (long Nintendo risk and short some video game industry risk). The problem with that play is that Sony is more than just video games and the stock is already depressed while NTDOY has been up. I do think both will fall if VG growth is below expectations so shorting SNE would provide you some hedging.
Wii, DS grabs spot in CNET Top 10 must-haves Gadgets
Wii at No. 1
"The Sony PlayStation 3 and Microsoft Xbox 360 may be the only boxes in town for hard-core gamers, but the Wii gets all the bonus points for mass appeal. Nintendo's generation-transcending console is in high demand, thanks to its revolutionary motion-sensing controller and fun titles."
DS at no. 7
"Need a sleek portable gaming machine that won't break the bank and boasts a ton of great games? It's time to look past the Sony PSP. Nintendo's DS Lite may not have the PSP's multimedia features, but it sure makes up for it with an affordable price tag ($129), microphone- and Wi-Fi-enabled gameplay, fun games, and backward compatibility with most Game Boy Advance titles."
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From the analyst reports I have seen, a lot of them are only forecasting (or at least they were) 20-25 million Wiis globally. These are very low assumptions; however, I think analysts have since realized their is actual demand for the Wii. The problem we need to figure out is how many Wiis is a $38.50 stock price predicting. I am pretty sure the greater market is not sharing the 75.37 million units prediction we are currently trading.
Additionally, it appears the Nintendo page isn't updating the stock price each day.