TL;DR: I saw Nintendo’s slide, so I decided to take a look at them and others. I like Nintendo, but am more skeptical of the others. Thoughts on Nintendo, Activision, EA, and Take Two? If you have anything that may help me improve or understand more, please let me know.
I am young and getting into investing, and when I saw that Nintendo has slid over 20% in 3-months, I was surprised. I decided to look into the basic fundamentals of Nintendo and some of its competitors, if only to practice stock research. I decided to look at Nintendo ($NTDOY), Take Two ($TTWO), Electronic Arts ($EA), Activision Blizzard ($ATVI), Zynga ($ZNGA), Konami ($KNMCY), and Ubisoft ($UBSFY) (Nintendo, Konami, and Ubisoft are international companies, so I listed, and mainly looked at, their ADRs). I also chose to ignore Sony and Microsoft because both of these companies are very diversified beyond video games, so I thought that it might skew the data, even though Nintendo directly competes against PS4 and Xbox.
For each company, I looked at their P/E Ratio, Current Ratio, and Debt / Equity Ratio. Then I averaged each number, weighted by market cap. I found that for each of these metrics, Nintendo looks good based on P/E Ratio and Current Ratio, although its Debt/Equity is high compared to its competitors. It seems to me that Nintendo is acting more aggressively than others, but that is less concerning considering how liquid they are. The average Current ratio is 2.64, and none of the companies fall below 1, which is comforting.
These are my thoughts after looking at this information and the 3 month & 1 year returns of each company:
I am surprised at Nintendo’s performance, as they seem very healthy and I don’t see any red flags on the numbers side. News wise, I can only assume that the slide is based people seeing a relatively weak E3 and a light holiday games lineup (though, with Smash and Pokemon, I’m not sure I agree with that). I see a successful new console, and I imagine they will continue to be very successful in the coming. In addition, according to MarketWatch, this year’s estimated earnings in $2.04 vs $1.24 last year. Looks like a buy to me.
For all of the other companies, I am surprised that they have all considerably outperformed the market. It has been a good year for video games according to sources like the NPD group, but seeing high P/E ratios, especially ATVI at 180+, is scary to me. On the games side, ATVI can lean on tentpoles like Candy Crush, World of Warcraft, and Overwatch, but I think that there is a real possibility that the new Call of Duty could fall short. I am not bullish on ATVI. For TTWO, I fully expect Red Dead 2 to do incredibly, but its release is definitely going to be a big swing for them. 2k games seem to be shaky, but will probably still perform well. GTA5 seemly can’t stop selling, as well. I think EA is in a similar boat with its EA Sports offerings, and Battlefield V should do better than Battlefront 2 did last year. These companies all seem poised to succeed, but I don’t know how long they can continue to climb like this.
That’s all I got for this. I really enjoyed doing this research and trying to understand it. Do you agree that Nintendo is a buy? Thoughts on ATVI, EA, TTWO, and the others? Again, I’m still new at this, so I would love to hear comments and critiques, I’d love to improve. What do you think?
- I got all of my data from MarketWatch.
Submitted July 19, 2018 at 12:04AM by I_Go_By_Q https://ift.tt/2O2NY75
