Nintendo shares surge in anticipation of continued Covid-19 gaming boom

A three-day surge in Nintendo shares has propelled the market value of the Japanese games maker past the country’s biggest bank, retailer and chemical company as investors bet on the long-term role of video games in a coronavirus-stricken world.

The share price increase comes as games industry experts judge that Nintendo is now close to revealing the line-up of games with which it plans to enter the first Christmas season under the pandemic.

Thursday’s 2.8 per cent rise took Nintendo’s share price beyond ¥50,000 per share for the first time since 2008 — the year in which the Kyoto-based company launched its family-friendly Wii console, drawing millions into gaming for the first time and reigniting investment interest in the company after a run of lean years.

At Thursday’s close, Nintendo was worth almost ¥6.6tn ($62bn) — a valuation that analysts say increasingly reflects the possibility that, by the end of the current financial year in March 2021, the company may have cumulatively sold more than 75m units of its Switch console around the world. 

Nintendo’s shares have been rising for several months, and the Switch — now entering its fourth year on the market — has been in hot demand from families looking for diversion from lockdown.

With each hardware purchase, new users have begun to buy from Nintendo’s thick catalogue of hit games such as Legend of Zelda and Mario Kart. The gentle-natured island simulator game Animal Crossing: New Horizons has sold in the tens of millions since it was launched in mid-March and has emerged as Nintendo’s signature distraction of the pandemic crisis. 

The latest surge in Nintendo’s share price, say traders, follows the decision by Bank of America and others to raise their target price on the stock to beyond ¥50,000 per share, arguing that as customers switch to digital downloads of new games, Nintendo’s margins will rise even higher.

The stock has long been a favourite of foreign investors, and brokers said that the most recent spike in the shares was likely part of a broader return to the Japanese stock market by overseas funds that have largely stayed away until the start of June. 

In a recent note to clients, David Gibson, of Astris Advisory Japan, said that while there remained supply constraints around the Switch, the trend suggested demand remained exceptionally high. The positive impact of the virus, he added, did not appear to have been included in Nintendo’s most recent, conservative guidance, which meant the market might still not have factored that in. “Once again, trends are stronger than forecast and imply significant upside to forecasts and guidance,” said Mr Gibson.

He added that the ending of hard lockdown conditions in some countries and a return to school by many children might cause the market to cool somewhat on the stock, causing it to lose a pandemic premium. He pointed out, however, that the ending of Japan’s state of emergency means that the video production teams in charge of presenting Nintendo’s new line-up of games could now return to work to produce their long-awaited presentation.

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