It's been two years since I added shares of Nintendo (NTDOY 0.88%) to my portfolio. The Japanese gaming giant was trading near a three-year low at the time, but I felt that Nintendo was ready to start winning again. The stock has risen nearly 60% since then despite its disappointing financial performance.
I had 3 reasons for initiating my position in 2023. The catalysts are ringing even louder in 2025. Despite running up since my first purchase, I decided to increase my stake last week. Let's get into why I think Nintendo is in a better position to deliver a victory over the end boss this time around, scoring even higher in the three bullet points I singled out previously.
OTC: NTDOY
Key Data Points
1. Let's go to the movies
Shares of Nintendo are beating the market in 2025, up 23% this young year through Monday's close. Nintendo is rising despite wrapping up a fiscal year with revenue declining for the third time in the last four years. The outlier was fiscal 2024, which started in April 2023. A big difference maker that year was teaming up with Comcast's (CMCSA +0.98%) Universal Studios to put out The Super Mario Bros. Movie in the first week of fiscal 2024.
The animated feature was released 30 years after the original live-action movie. The 1993 release was a dud, but the lighter, more family-friendly animated makeover finally connected with audiences. It was one of only two movies released in 2023 to top $1 billion in worldwide ticket sales. Only Barbie fared better at the box office.
It's not just about the ticket sales, of course. There are several windows for retail and digital distribution after a successful theatrical run. There is also an obvious lift to merchandising and consumer product licensing opportunities when a film is a hit. Why does this matter now? Well, Nintendo and Comcast have The Super Mario Bros. 2 coming out in April of next year. As big as the first animated flick was two years ago, sequels of blockbusters tend to fare even better.
Image source: Nintendo.
2. Let's go for a ride
My final piece of research before making my decision to buy Nintendo two years ago was visiting Super Nintendo World at Universal Studios Hollywood shortly after its Feb. 2023 debut. Don't you love mixing business with pleasure? Nintendo -- again teaming up with Comcast -- struck a deal to open Super Mario-themed areas across its Universal Studios theme parks.
The partnership was announced in 2017, but it takes time to build out theme park expansions. The land debuted at Universal Studios Japan in 2021, California followed in 2023, and an even more ambitious entry opens in three months at Universal's Epic Universe theme park in Florida. It will be much larger than the California version, featuring three rides as opposed to just the single signature Mario Kart: Bowser's Challenge augmented reality-assisted racing attraction.
Epic Universe will be the first major theme park built in this country in more than two dozen years. The hype is real, even if you didn't catch the Super Bowl commercial over the weekend.
It's not just about the licensing revenue that Nintendo is collecting from the partnership. I have visited Universal Studios Hollywood three times since the new area was introduced, and it's routinely the busiest section of the movie lot theme park. The gift shops (yes, there are a couple of Nintendo gift shops in the park) and themed restaurant are perpetually crowded. Epic Universe should be an even larger contributor, and Universal Studios Singapore is next on the expansion radar.
3. Let's play
I may have buried the lede. Nintendo is a gaming company that was founded in 1889 as a maker of playing cards. The reason the last few years have been financially ho-hum is that Nintendo still lives and dies by its console releases. It's now been eight years since the Nintendo Switch hit the market, a much longer gap than usual for the classic video game stock.
- 2006: Wii is introduced
- 2012: Wii U is introduced
- 2017: Nintendo Switch is introduced
My 2023 bullish thesis was that a new gaming system had to be on the way. It had been just six and five years between the previous rollouts, respectively. Unlike its Xbox and PlayStation rivals, Nintendo console introductions are materially different from their predecessors.
I didn't get a new console in 2023 or even 2024, but this year will be different. Nintendo announced that the Nintendo Switch 2 would be hitting the market later this year. It will offer more details at its Nintendo Direct event on April 2.
There is an interesting cyclicality to the life of gaming consoles. The first year will see a jump in revenue, often dominated by low-margin hardware. Sales peak roughly three years later as the pipeline of higher-margin software titles and installed player base expands. The new fiscal year starting in April will break the streak of dull financials, and it will only go uphill from there.
Despite the ups and downs of the business, Nintendo remains consistently profitable. Its cash-rich balance sheet brings down its $84 billion market cap to an enterprise value of $70 billion. Today's modest dividend should widen dramatically as Nintendo's profitability jumps as high as Super Mario on a steady diet of power moons. Don't be surprised if the stock follows suit.
