Nintendo hasn't been faring so well of late. The company had to slash the price on its 3DS and reduce its annual profit forecast. Meanwhile, the company's stock has been down 40% this year. Overnight, however, Nintendo's stock suddenly jumped 10%. What happened? Are investors now encouraged by the new low 3DS price?
Well, that may have helped, but the real explanation for the boost is actually that there are now expectations of Nintendo being included in the Nikkei 225 Stock Average. At the moment, Nintendo shares are traded on the Osaka Exchange.
Panoptic Management Consultants CEO Asif Khan explained to IndustryGamers, "Nintendo shares spiked 9.8% overnight in Japan on a rumor that the Japanese traded 7974 shares could be added to the Nikkei 225 index. This is great news for Nintendo shareholders as most companies on the verge of self-destruction are rarely added to benchmark indices. When stocks are added or dropped from market indices it forces ETFs, and mutual funds to buy or sell shares. In the case of Nintendo, any fund that attempts to mimic the Nikkei 225 will have to buy up shares."
Khan continued, noting that Nintendo actually could climb back beyond the $50 per share mark: "I believe we are seeing savvy buyers trying to front run that trade. If you know that there are big ETF and mutual fund buyers waiting for the rumor to become official, why not get in ahead of them? This is why I believe that Nintendo is up on the day. We own the NTDOY ADR for clients and in our personal accounts and this move above $19/share is just the beginning of what we believe is in store for this company. I believe NTDOY could reach $50-65/share over the next 3 years, so this $1.50 move today is welcome but not exactly a tectonic shift. We continue to like shares, and today's rumor of the addition to the Nikkei 225 should be viewed as a vote of confidence in Nintendo's future.
"Of course, we must wait to see if this rumor is true before we break out the Jigglypuff champagne glasses."
Industry Gamers
