The Japanese company has a solid balance sheet and promising products in its pipeline.
Last week, the release of a mobile game propelled Japanese video game and console maker Nintendo (NTDOY) back into the spotlight.
The company's Pokemon Go, an augmented reality game using Nintendo's licensed characters, is already the most popular mobile game in U.S. history. It's also a top-grossing app in both Apple's and Alphabet's app stores and already outpacesTwitter for daily users. Nintendo has stakes in the game's privately held developers, Niantic (a spin-off of Alphabet) and the Pokemon Company.
But Pokemon Go represents only part of the good news for the company. Nintendo has other promising products in its pipeline and a good balance sheet. This is a stock to buy and hold. It will present investors with opportunities for massive profits.
Shares rose more than 9% in Friday trading to finish at $33.38.
Pokemon Go was developed by Alphabet spinoff Niantic Labs. Some players may already be spending more time with the game than on Facebook.
Considering its success, it's no wonder companies globally are jostling for profits. T-Mobile , which is trying to boost subscribers, is promising free data for gamers using the app. McDonald's is in line for a sponsorship deal that will lead players through the Golden Arches, and even Barnes & Noble is discussing a potential deal.
Nintendo, which is known for its Wii, DS, and Game Boy consoles, is already having a good year. The stock is up more than 90% year to date, after a solid 2015.
There are several reasons to feel optimistic about Nintendo's next-gen console, the NX, which is slated for a spring 2017 release. In contrast to gaming console rivalsMicrosoft and Sony, Nintendo sells its hardware at a profit, so it's sure to be both a moneymaker.
The NX will debut with a new entry in the Legend of Zelda franchise, also scheduled for release on the Wii U. The next batch of mobile games (role-playerFire Emblem and community game Animal Crossing) from Nintendo will pursue monetization through in-app purchases.
Also promising, the company is starting to look at the thriving smartphone market and recently unveiled a strategy to make its mobile games free to play. With gamersbidding goodbye to video disc-based games already, mobile is the real battleground.
With the company's stock rising fast, it may seem there are a ton of bets on Nintendo. But Nintendo is a stock to buy and hold.
Even in its difficult years, Nintendo has kept positive free cash flow and is low on debt.
The median analyst estimate for third-quarter 2017 earnings growth is 48.4%(revised from 44.9% just a month ago). The projection for the third quarter of 2018 is higher. Clearly, there will be big profits in the long term.
Although Nintendo may not be a value stock anymore, it should grow strongly in the months ahead.
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