Analysts at Jefferies believe that mobile gaming will be the ultimate path to huge profits for Nintendo.
“While most investors have written off Nintendo’s mobile game business, our recent meeting with Nintendo management has convinced us that if anything, Nintendo is doubling down on the mobile game business while making prudent changes to its mobile game plan,” Jefferies said in a note to clients Monday.
The research firm is betting that Nintendo will begin to land more hits like Pokemon Go as time goes on. Nintendo doesn’t focus on making their quarterly profits look good to investors, but is more focused on setting up its business for the future, Jefferies wrote.
Super Mario Run was a failure because of its one-time purchase price model. Fire Emblem did well with the more popular “freemium” model, but players ran out of content after about a month, according to Jefferies. After meeting with Nintendo executives, Jefferies believes the company is taking these previous lessons to heart and is ensuring both profitable price structures and adequate depth to its games on launch.
This is evidenced by Nintendo’s recent relaunch of Pokemon GO. The updated app adds depth and collaboration features that Jefferies thinks will continue to be profitable.
‘It may not reach the viral proportions, but we recommend investors keep a close eye on the revenue rankings of this game to see how these companies are learning and evolving,” Jefferies said. “It will be a huge mistake to write off Nintendo’s IP. That is the real value. That is the treasure trove.”
Jefferies thinks the company has room to grow by focusing on methodical releases of games that it perfects over time. The company has a price target of 57,500 Yen, more than 46% higher than the current price of 39,280 Yen.
Nintendo was up 2.19% Monday after news of the new Super NES Classic system. The company is up 60.46% this year.
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