Nintendo Gets Downgraded -- Have Wii Sales Peaked?

Ail

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Ail on 21 March 2008

Nintendo is currently trading at a P/E of 67 which is exceptionnally high and makes the stock very expensive( close to the price of a lot of High tech company before the dot-com bubble exploded). The only justification for that is the expectation of high growth within the company that puts the forward P/E at a lower level.

For reference the S&P 500 average P/E was 19.7 at the end of Q3 2007, by now it's probably around 18.5 or so....

So yes, that analyst is right in his analysis of the stock even if his analysis of the expectations of Wii sales could probably be off.......( at the current rate the dollar is trading I don't see how Nintendo could keep doubling profit every year for the next 3 years as the stock price seem to imply...)

PS3-Xbox360 gap : 1.5 millions and going up in PS3 favor !

PS3-Wii gap : 20 millions and going down !

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Just_Ben on 21 March 2008

FishyJoe said:
Some other things to consider. Nintendo has probably been able to reduce cost through cheaper production but is still able to maintain prices.

In addition, a larger user base means means greater software sales, where most of the profit is generated. So even if hardware sales flatten, software sales can still increase. Older games, such as brain training, generate more profit as well, since development costs are no longer a factor.

hmmm true true, installbase leads to higher software sales overall. I will post an analysis in the next week to show that all game console are software movers right know ;)

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FishyJoe on 21 March 2008

Ail said:

Nintendo is currently trading at a P/E of 67 which is exceptionnally high and makes the stock very expensive( close to the price of a lot of High tech company before the dot-com bubble exploded). The only justification for that is the expectation of high growth within the company that puts the forward P/E at a lower level.

For reference the S&P 500 average P/E was 19.7 at the end of Q3 2007, by now it's probably around 18.5 or so....

So yes, that analyst is right in his analysis of the stock even if his analysis of the expectations of Wii sales could probably be off.......( at the current rate the dollar is trading I don't see how Nintendo could keep doubling profit every year for the next 3 years as the stock price seem to imply...)

The PE is not 67. A lot of quote sites have the NTDOY forumula wrong since it's an ADR worth 1/8 Nintendo share and priced in US dollars.