What Pokémon GO Means For Nintendo Shareholders

Pokémon GO, the newest craze in mobile gaming, helped boost shares of Tokyo-listed Nintendo Co., Ltd (TYO: 7974) (ADRs trade under NTDOY) by around 25 percent.

The question many investors are now asking is what affect, if any, the new game will have on Nintendo's stock.

Macquarie: Good Sign, More Monetization

David Gibson of Macquarie Capital Securities (Japan) commented in a research note that shares of Nintendo should "react positively."

Gibson noted that the new Pokémon game is "being overloaded by demand," which is a "good thing" over the longer term if the game developers fix several bugs including server problems.

Gibson added that it is a good sign that the majority of spend among users is for a $0.99 item in the game. This suggests that total spending is being driven by a large number of users, rather than a lot of spending from fewer big users.

Related Link: The Dangers Of Pokémon GO

However, Gibson noted it is not yet clear what Nintendo's actual economic interest in the game; Nintendo itself will only earn 10 percent of units earned. On the other hand, Nintendo's 33 percent stake in Pokémon Company will result in incremental income.

Gibson maintains an Outperform rated in Nintendo's Tokyo-listed stock, with an unchanged price target of ¥21,300.

Deutsche Bank: Much More To Come

Deutsche Bank's Han Joon Kim commented in a research report that Pokémon Go is merely Nintendo's "leadoff hitter," as the company is only getting started in the mobile space.

According to the analyst, Pokémon GO has already "gone beyond success" and is now a "phenomenon"; the company has even stopped rolling out the game in new countries, as high demand is overloading its server capacities.

Kim continued that Pokémon GO is "unlikely to materially impact" Nintendo's financials given its relatively low take rate. However, the analyst is "confident" that future mobile games, including "Animal Crossing," "Fire Emblem" and a possible 2017 "Zelda" release will indeed impact its financials.

The analyst added that future mobile game releases represent the "real big hitters to drive Nintendo to score high in mobile."

Kim maintains a Buy rating on Nintendo's stock with an unchanged price target of ¥23,600.

At time of writing, ADRs of Nintendo were up 30.25 percent on the day, trading at $27.01.