Nintendo Co., Ltd (ADR) (OTC: NTDOY) is on
a roll as its shares climbed more than 41 percent after its mobile game Pokemon GO's chart-topping performance in the U.S. The
company has added at least $7.5
billion to its market value in the past two sessions, while volume on Monday was at an October 2015 high.
The title was jointly developed by Niantic, Pokemon Company and Nintendo. Thanks to the Appe Store, Apple Inc.
(NASDAQ: AAPL) may stand to be win big from the game.
"It is unclear exactly what their economic interest is in the game, but we presume that out of every 100 units earned at the app
store, 30 would go to Apple, 30 to Niantic, 30 to Pokemon and 10 to Nintendo. Hence, we don't think Nintendo will earn much
directly from the game," Macquarie analyst David Gibson wrote in a note.
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That said, Gibson said Nintendo will earn income from its equity-accounted income of owning 33 percent of Pokemon Company.
"We have assumed a #10 ranked game in Japan generates ¥12bn pa, which results in ¥3.6bn NP for Pokemon Co. Nintendo would book
33% of that or ¥1.2bn, which is 3.3% of FY3/17 NP guidance," the analyst noted.
Gibson, who has an Outperform rating on Nintendo shares, initially thought the title as per its beta would have little
monetization. Instead, it performed more than his expectations as users build their Pokémon inventory, spending money becomes
needed to store, train, hatch and battle.
"The most popular item in Australia is $0.99 of coin, which we think is a positive, as it means its #2 gross ranking is being
driven not by big spenders but by a large number of users," Gibson highlighted.
"We estimate a #10 gross ranking in Japan would represent approx 3-5% to Nintendo NP pa (assuming 33% stake in Pokemon and no
other stake in the game). A #5 gross ranking in Japan would add 7-10% to NP pa. A USA ranking of #1 gross would add 9-15% to NP
pa," Gibson added.
ADRs of Nintendo touched a new 52-week high of $30.25. At time of writing, they were up 41 percent to $29.31.
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