Nintendo Stock Outlook: It’s Time To Take Profit On Nintendo

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

NTDOY Stock Outlook


  • Investor confidence over NTDOY went sky-high after the debut of the Switch game console. Congratulations to all those who went long NTDOY before the Switch was released.
  • Nintendo launched the Switch last March 3. Its stock has since returned +69.1%. Nintendo also posted a 52-week high of $44.33 last month.
  • To date, the cumulative global sales of the Switch have reached 4.7 million units. The Switch’s early success is why Nintendo’s latest quarterly ER showed it achieved +148.6% Y/Y revenue growth.
  • Nintendo seems unable to extract faster production and distribution of its hit game console. The Switch competes for essential components that Apple, Samsung, and other smartphone vendors require.
  • Greed is good, but it might be time to take profit on NTDOY now while the euphoria over Switch fades away.

Nintendo (NTDOY) its Q1 numbers last July 26. Strong sales of the Switch consoles and games helped Nintendo swing back to profit this year. The company lost ¥5.13B ($46.32 million) last year, but Q1 (April-June) performance showed Nintendo achieved operating profit of ¥16.21B ($145.65 million). Nintendo is the developer and publisher of the three top-selling Switch video games, the $59.99 Zelda: Breath of the Wild (3.92 million units sold), Mario Kart 8 Deluxe ( ), and ARMS (1.18 million units sold).

Nintendo has apparently sold 4.7 million units of the Switch. In spite of the few reported overheating issues and really persistent global short-supply, the Switch is why NTDOY has returned +69.1% since March 3, launch date of the said game console. NTDOY notably outperformed the stocks of its console gaming rivals, Microsoft (MSFT) and Sony (SNE). After years of struggling in game consoles, Nintendo suddenly has a hit product!

ntdoy stock outlook

(Source: Google Finance)

I made a go-long recommendation for Nvidia (NVDA) last year because I like the potential of a hybrid portable/dockable gaming console. I also made a bull case for NTDOY last May precisely because of the great demand for the Switch. The Nvidia Tegra-powered Switch is nothing like the Wii, PlayStation 4, or Xbox One. It’s small, trendy, and very unique. I knew many gamers will buy it for the portability/convenience alone. On the other hand, greed is good but prudence is sometimes better. I opine NTDOY has peaked and it’s now time to take profit. Take the money and run. The sell-side might soon catch up with the buy-side team of NTDOY.

NTDOY Flashed Sell Signals

A Moving Average Convergence Divergence [MACD] analysis will tell any technical-aware investor (I’m not an expert) that NTDOY is not a buy right now. I am using MACD because NTDOY had a strong up trend.  The chart below from StockTA now has a red warning, NTDOY has a Bottom Bearish Divergence MACD trend signal. Bearish divergence means NTDOY has lost its upward momentum. Any English-literate reader should be able to understand the chart below.

ntdoy stock outlook(Source: StockTA)

A bearish divergence comes about when NTDOY is going up in price but the MACD line is making new lows. Focus at the July portion of the chart below. NTDOY’s price was in an upward trend but the MACD line took a deep dive and refused to climb back up.

If you also use Stochastic, NTDOY has a score of 83.60, and 80 is usually the overbought threshold. In my book, hitting overbought status means it is the time to take profit before the bullish trend reverses. Again, I am not well-versed in technical analysis. Do your own due diligence investigation to find which indicators suit your stock exit strategy.

The Switch Euphoria Will Eventually Fade Away

The high investor confidence generated over the early success of the Switch is not going to last forever. The Switch-induced euphoria over NTDOY will eventually expires. There are factors/issues that could hurt investor confidence. One of these future deflators is obviously the persistent global short-supply. Nintendo announced last March that Switch production will double this year. However, July is almost over and yet Japan (home country of Nintendo) retailers are still having a hard time meeting the demand.

I expected that by now Nintendo would have been able to meet Japan’s domestic demand for the Switch. Fortune reported last May that Apple (AAPL) is partly to blame for the production shortages of the Nintendo Switch. Another news site blames both Apple and Samsung (SSNLF) for the weak production rate of the Switch. These two smartphone vendors are apparently gobbling up all the NAND flash storage for their upcoming/released flagship phones.

Common sense told me that suppliers of NAND flash storage or screen displays will always prioritize the iPhone 8 over the Switch. Getting behind in the production timetable is therefore an obvious headwind for NTDOY. More often than not, a persistent short-supply of the Switch could generate customer dissatisfaction/disappointment.

The bullish trend of NTDOY cannot last the whole 2017 if Switch production is beset by scarcity of components. Not all investors are tolerant, many will eventually lost faith in Nintendo if its management can’t solve the lingering production shortages of the Switch.

The Switch-induced bull run for NTDOY was also hurt by Nintendo’s postponement of its advertised paid subscription service for the Switch. The over-optimistic investor confidence level is not going to last forever if Nintendo itself cannot meet its own previously announced schedule.

ntdoy stock outlook

(Source: Pocket-Lint)

I have a theory why Nintendo had to postpone the $20/month online subscription service for the Switch. It’s because Nintendo needs more games available for the Switch platform. A fat library of games is why Microsoft and Sony have successful subscription services for their gaming consoles. It looks to me that the third-party game developers who promised to back the Switch platform last year aren’t actually releasing games. It was all lip service.

This was the marketing chart released by Nintendo last year proclaiming the names of its third-party partners for the Switch.

ntdoy stock outlook

(Source: Nintendo)

Go check the game store for the Switch. Did you see any hit console games made by Activision (ATVI) or Electronic Arts (EA) being ported to the Switch platform? I found none. The long-term viability of any new console like the Switch is heavily dictated by third-party support. If the biggest publishers in console gaming are not releasing titles for Nintendo’s latest game console, investors should beware.

Below is Super Data Research’s list of estimated top-grossing video games for June 2017. As far as I know, none of those ten top-grossing console games is going to be ported to the ARM-based, Tegra-powered Switch. Like the failed Wii U console, Nintendo again will shoulder the heavy lifting of making new games for the Switch.

ntdoy stock outlook

Console gaming is on the level of PC gaming, it requires heavy hardware requirements. Unfortunately, Nintendo made the Switch use an ARM-based processor, the Tegra X1. Top console games publisher like Take-Two (TTWO), Activision, and Electronic Arts have not proved themselves interested/capable of making hit ARM-based video games.

Going forward, third-party support for the Switch will likely only equate the limited library of games of the Nvidia Shield Android gaming tablet. Take away all the hype, the Switch is not on the same league of the PlayStation 4 or Xbox One. The Switch is just another ARM-based gaming machine that indirectly competes with the Shield tablet/TV,  iPhone 7 Plus and other Android phones/tablets. ARM-based game developers are going to stick to the bigger, more lucrative iOS/Android platforms.

My fearless forecast is that Nintendo will not have an easy time attracting long-term customers for its paid Switch subscription service if there are no hit third-party console games available. Nintendo’s hit video game titles will eventually run out of commercial appeal on the Switch platform. People will finish playing them and then what?


I am NOT short NTDOY. This is just a friendly reminder that it is always better to quit when you are ahead. NTDOY has obviously made many people rich on paper. Why not cash out now while NTDOY is still trading near its 52-week high. I think I presented enough reasons to do so. Do not be like the overconfident Senator Manny Pacquiao. Quit boxing while you are already ahead and rich enough.

Yes, you can ignore this article and stay long NTDOY. I got no problem with that. It’s your money, it’s your problem. I Know First has positive near, intermediate, and long-term forecasts for NTDOY. You can heed my advice to take profits now on NTDOY or you can stay long and follow the market trend forecasts from I Know First.

ntodoy outlook

Past I Know First Forecast Success with NTDOY

I Know First has made accurate predictions on NTDOY in the past, such as its bullish article published on May 28th, 2016. During the one year time period, NTDOY shares increased by 102.97% in line with the I Know First algorithm’s forecast. See chart below.ntdoy stock outlook

(Source: Google Finance: NTDOY)

This bullish forecast for NTDOY was sent to I Know First subscribers on May 28th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

ntdoy stock outlook

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