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Nintendo shares in Japan soar to levels not seen in more than 10 years — one analyst urges caution

In this photo provided by Nintendo of America, fans of all ages experience fun photo ops, game demos and other Luigi’s Mansion 3-inspired goodies at a preview event in Los Angeles on October 18, 2019.

Frazer Harrison | Getty Images for Nintendo of America

Shares of Japanese game-maker Nintendo surged on Thursday to levels not seen in more than a decade, but investors may want to stay away from the stock, one analyst warned.

Nintendo’s stock closed at 50,110 yen per share on Thursday. The stock traded as high as 50,180 yen per share earlier in the session. Thursday’s moves mark the first time since August 2008 that Nintendo shares closed above the 50,000 level, according to data from Refinitiv.

There are two possible reasons why Nintendo stocks gained ground on Thursday, said Amir Anvarzadeh, a Japan stock market strategist at Asymmetric Advisors. One reason could be due to the announcement of new Pokemon games, while another may be because people are anticipating another round of lockdowns.

Firstly, he said it was “partly” due to Nintendo’s recent announcement of new games in the Pokemon franchise, including a new title for its Switch console.

Since the runaway success of its social simulation game “Animal Crossing: New Horizons,” the pipeline for Nintendo’s new games has been thin, based on the firm’s launch schedule. One exception was the upcoming release in the Paper Mario series featuring the iconic plumber.

“The 2nd wave will not lead to lockdown periods which provided the positive distortion to (Nintendo’s) sales in the first wave.”

Amir Anvarzadeh

Market strategist, Asymmetric Advisors

Even before Nintendo’s announcement of the new Pokemon games, Serkan Toto, CEO of game industry consultancy Kantan Games, told CNBC he was “not worried” over the pipeline of games, as it was mainly caused by the pandemic affecting the release dates of software.

Toto said earlier in June that it was not likely that Nintendo had no new software to release, but rather, that the firm did not want to excite fans and then disappoint them later.

The second reason could be due to growing concerns of a second wave of coronavirus infections in some countries, fueling expectations of another round of lockdowns, Anvarzadeh suggested. Sales of video games spiked during the initial period when countries first went into lockdown.

“We have been telling our clients to sell into this because the 2nd wave will not lead to lockdown periods which provided the positive distortion to (Nintendo’s) sales in the first wave,” he said in an email. “This is a very important distinction which the market might be overlooking.”

Anvarzadeh’s comments come amid concerns over a recent surge in Covid-19 cases stateside, with the number of coronavirus hospitalizations across Texas surging about 11% in a one day on Wednesday. In China, authorities have reportedly taken swift measures after a new coronavirus cluster was found in its capital city of Beijing.

Commenting on the outlook for Nintendo’s flagship Switch console, a hybrid device which allows gamers to either play at home while connected to an external screen or on-the-go, the strategist said its potential for growth “is rather limited.” For its part, Nintendo acknowledged in early May that its product supply may be disrupted if the impact of Covid-19 “is prolonged or worsens further.”

“We think the end of lockdowns will inevitably slow game sales across the board but that should impact (Nintendo) the most given the benefits it had seen from its fortunately timed launch of family-oriented Animal Crossing just as the pandemic was declared,” Anvarzadeh said.

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