One researcher feels that historical patterns favor buying the video game veteran’s shares; its fundamentals are impressive, too.
Investors were happy to play with Nintendo (NTDOY 2.96%) shares on the first trading day of the week. The storied Japanese video game company’s stock saw a nearly 3% lift in price on the day, following an analyst’s initiation of coverage with a resounding buy recommendation. That rise was on a generally down day for the market, as evidenced by the benchmark S&P 500 index’s nearly 1% slide.
Started at an unambiguous buy
The initiating party was TD Cowen prognosticator Doug Creutz, who inaugurated his Nintendo coverage with said buy recommendation and a price target of 10,600 yen ($71.25) per each of the company’s Japan-listed shares.
In his research note launching coverage, Creutz dug into the video game mainstay’s history as a publicly traded company. Nintendo’s latest video game console should be released in the next seven to 15 months, he wrote, and the months leading up to console releases have traditionally been an ideal time to buy its shares.
“Since 1994, during periods that are within one year of a home console launch (before or after), a total window of 10 years, Nintendo shares have outperformed the market by a cumulative 524%,” he pointed out.
Past performance does not guarantee, etc.
As investors, we should never buy into a stock expecting past trading patterns to repeat themselves. Yet Creutz also had solid fundamental reasons for his Nintendo buy recommendation; in his view, the company has managed to keep the quality of its games high, allowing it to consistently book high-margin sales on its wares.