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This Analyst Isn't Buying Into Pokémon GO's Success Just Yet; Maintains Sell Rating On Nintendo

This Analyst Isn't Buying Into Pokémon GO's Success Just Yet; Maintains Sell Rating On Nintendo - NINTENDO CO LTD ADR NTDOY, Apple Inc. NASDAQ:AAPL

Everybody seems to love the new hit mobile game Pokemon GO. Nintendo Co. Ltd (ADR) NTDOY 15.14% shareholders may love it more than anyone, as shares are up a staggering 69.1 percent since July 1. However, not everyone is aboard the Pokemon train.

On Tuesday, CLSA analyst Jay Defibaugh released a note pointing out that, while the game itself may be a huge money-maker, its unclear how much Nintendo will profit.

“In our past conversations with Nintendo management in the context of Pokemon games for Nintendo handhelds and consoles, management has indicated that Nintendo receives royalties for Pokemon titles but, surprisingly, little direct profit, benefiting instead from the impact of Pokemon titles on hardware sales and penetration,” he explains.

According to Defibaugh, CLSA hasn't included any Pokemon GO-related revenue in its Nintendo model.

Macquarie analyst David Gibson estimates that, when all is said and done, Nintendo receives roughly 20 percent of the profits from Pokemon GO either directly or via its 33 percent stake in Pokemon Company.

By comparison, Gibson estimates Apple Inc. AAPL 2.1%'s Pokemon GO take is roughly 30 percent.

The true numbers are a bit vague because of Nintendo’s 10 percent ownership of Creatures and the fact that Nintendo, Pokemon Company and Alphabet Inc GOOGL 0.83% all participated in a $30 billion fundraising round for Niantic, Pokemon GO’s developer, in September 2015.

CLSA maintained its Sell rating on Nintendo stock.

Disclosure: the author holds no position in the stocks mentioned.

DateFirmActionFromTo
Jan 2015Bank of AmericaInitiates Coverage onUnderperform
Jan 2015JefferiesUpgradesUnderperformHold
Dec 2014JefferiesDowngradesHoldUnderperform

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