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Why Nintendo (NTDOY) Is A Strong Buy

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The global video game market is bigger than ever, as esports take off and mobile gaming continues to grow. Yet, even as Activision Blizzard’s (ATVI - Free Report) new “Overwatch” league launches on Wednesday, historic gaming giant Nintendo (NTDOY - Free Report) looks poised to thrive in the new age of video games.

Near the end of November, market research firm Newzoo revised its initial global video game revenue projections to $116 billion, which marked a $7.1 billion jump and a 10.7% year-over-year increase. And in just the last 10 months alone, Nintendo has grabbed a decent chunk of that video gaming pie.
The Japanese gaming power announced that as of December 10, worldwide sales of its Switch console surpassed 10 million units. Nintendo’s newest gaming console, which launched in March and retails for $299.99, recently became the fastest-selling console ever in the U.S.

Looking forward, Nintendo reportedly expects to sell 20 million Switch devices in its next fiscal year. On top of the Super Mario maker’s widely popular new console, the company is also cashing in with a range of classic titles, including a new Pokémon game scheduled for 2018.

The Fundamentals

Shares of Nintendo climbed nearly 3% on Wednesday as part of what has been a strong run for the company over the last year. Before Wednesday’s gains, the legendary Japanese video game maker had seen its stock price skyrocket 77.74% over the last 52-weeks.

Yet, investors will likely be happy to note that Nintendo’s stock price sits 8.5% below its 52-week high water mark. This should give the stock room to grow without the added burden of having to break through a new threshold.

However, looking ahead, Nintendo’s stock could theoretically soar past its current year long high if it closes in on our current Zacks Consensus Estimates. The company is projected to see its current quarter sales soar 138% to reach $3.81 billion.

Looking further down the road to Nintendo’s current full fiscal year—which ends in March—the company’s earnings are projected to reach $1.23 per share. This would mark a 232.43% year-over-year jump. What’s more, Nintendo’s full-year revenues are projected to surge 112% to hit $9.51 billion, based on Zacks Consensus Estimates.

Nintendo’s current cash flow growth rate of 92.06% also blows away the “Toys – Games – Hobbies” industry’s 10% average, and crushes competitors such as Electronic Arts (EA - Free Report) . This should help the company invest in the future.

What’s more, the company has received one positive earnings estimate revision for its current fiscal year within the last 60 days. In that same time frame, Nintendo also received one positive revision for the following year. Nintendo is also currently a Zacks Rank #1 (Strong Buy).

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