Dubai: Popular stock Nintendo may be a classic case of a bubble as Saxo Bank feels that current share price does not justify valuations.
Traders in Nintendo, whose shares fell nearly 18 per cent on Monday, the most since 1990, may take short positions and or book profits, Saxo Bank said. The stock has gained nearly 60 per cent since July 1.
“One could be tempted to say that the Nintendo stock finds itself in ‘augmented reality’ just like the Pokémon’s’ in the game,” Peter Garnry, Head of Equity Strategy at Saxo Bank said in a statement.
“We believe the stock has reached its peak, and investors should consider taking short positions in order to profit as the stock drops to a lower, more reasonable level,” Garnry said.
Garnry said the game is seeing an average revenue per daily active user (ARPDAU) of $0.25, which is $0.05 higher than the previous record ARPDAU of $0.20 posted by King Digital’s Candy Crush. Even if the Pokemon Go reaches 1 billion users, and raise ARPDAU to $0.50, it does not justify valuations, he added.
“Nintendo needs to find revenue streams yet to be seen on mobile before the equation adds up. The potential for advertisement placement and similar monetisation is strong but the value of such initiatives is exceedingly uncertain,” says Garnry. Nintendo shares ended at 23,220 yen on Monday.
