at this point, what is the potential upside of Nintendo? if Wii and DS are the only products, its profits might hit a peak sometime next year, when it's easy to assume the DS and the Wii reaches an equilibrium sales level worldwide.
give nintendo another 50% profit increase, the p/e would be in the low 20's, which is more than reasonable, for the leading company in a growing industry. but... is that all?
i'll be following nintendo very closely over the next year or so; hopefully there'll be news that convinces me that this company knows how to keep generating new sources of revenue.
most people believe the yen is undervalued, and it's part of the reason nintendo's stock is riding high. this is another risk. US investors are partially hedged against this... nintendo uses 1$ = 115 yen in its earnings estimate apparently. right now think it's at 123 yen. (the weaker the yen the better it is for nintendo's bottom line.)
however, i'm confident that nintendo has a grand Wii strategy that we haven't seen yet, thus i'm holding onto to my NTDOY tightly; multiples of in the 30s really isn't so bad at all.
another reason to hold onto it: with like $7 bln in cash, nintendo could issue a special dividend. paying out say $3 bln would be more than 5% of nintendo's market value, no small amount.
the Wii is an epidemic.
