Pokemon Go Could Add $3 Billion In Incremental Sales For Apple

Nintendo Co., Ltd (ADR) NTDOY shares shot up more than 100 percent following the launch of the hit game Pokemon GO, adding more than $21 billion to Nintendo’s market cap. At the same time, Apple Inc. AAPL, owner of the App Store that sells the app, has added only $2 billion in market cap.

Accoding to Needham analyst Laura Martin, the market is not fully appreciating the impact the Pokemon GO could have on Apple’s bottom line. She highlights two ways that Pokemon GO should line Apple’s pockets.

“We believe Pokemon Go underscores 2 underappreciated investment qualities of AAPL: 1) AAPL is THE global distribution platform for mobile content winners (not just Pokemon Go), with the wealthiest consumers; and 2) for Pokemon Go, we believe AAPL keeps 30% of Pokemon GO’s revenue spent on iOS devices, suggesting upside to earnings, plus valuable options on future hits,” Martin explains.

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Needham estimates Pokemon GO could add $3 billion in high-margin incremental revenue for Apple over the next two years.

By comparison, Candy Crush, the game that Pokemon GO has dethroned as the biggest mobile game in history, produced revenue of over $1 billion in both 2013 and 2014 with a 2 percent ratio of paying users to total users. So far, Pokemon Go’s ratio is roughly 20 percent.

Martin expects that Apple will ultimately generate more near-term cashflow from the game than Nintendo. Needham maintains a Strong Buy rating on Apple and a $150 price target.

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