A brand known to provoke nostalgia in many, Nintendo is a Japanese legacy corporation that produces video game consoles, mobile games, and owns the intellectual property rights to franchises including Mario, Donkey Kong, The Legend of Zelda, Animal Crossing, and many more. Their most recent console release of the Nintendo Switch in 2017 has achieved record sales numbers and has continued to increase its sales through 2020's holiday season [Switch Lite released in 2019]. Consequently, their stock is trading higher than it ever has, comparing primarily to a huge valuation increase from 2006-2008 that eventually fell to original levels. This time however, I have a feeling Nintendo will be successful through 2021 and keep extending the rally it has had.

Hardware:

Consoles and accessory hardware make up 96% of Nintendo's revenue which might be worrying for some. Regardless, hardware sales for the fiscal year [ended March 2020] totaled 21.03 million units (24.0% increase on a year-on-year basis). Additionally, during the Fiscal Year Ending Mar. 2021 (Conference Call), President Shuntaro Furukawa stated, "Nintendo Switch is maintaining sales momentum as it enters into the holiday season of its fourth year since launch, and we are striving to extend that momentum as long as possible." Extrapolating from this I assume the 2020 holiday season was a success in terms of Switch and Switch Lite sales and I think this bodes well for the stock in the short term when the numbers get released. Hopefully throughout the Covid lockdowns they sold millions more units.

Top Selling Games -

all currently ~$60 games to download

Nintendo Online -

Aside from downloading a game directly to your console, Nintendo has followed the trend of companies offering a subscription service to access online play in multiplayer titles as well as extra games and features. With $3.99 a month, $7.99 for 3 months, or $19.99 for a year subscription offerings, Nintendo Online has amassed over 26 million members as of September 2020. Moreover, Nintendo understands that the video game market is rapidly shifting to a state where digital points of contact are essential to nail and micro-transactions/subscriptions are becoming a more reliable source of constant revenue. They are increasingly releasing paid downloadable content for fans to constantly expand a single game experience they pay for rather than multiple different games.

Mobile Apps -

With 7 applications released between 2016 and now, Nintendo has reached a "combined total of 650 million unique downloads." While mobile gaming is an extremely small portion of Nintendo's revenues, the growth potential of mobile apps behind IP they own is incredible. They also cleverly have subscriptions to individuals games because they know certain fans are only loyal to very few franchises but will still purchase. For example, The Animal Crossing Pocket Camp mobile game costs $7.99 per month for extra features in game like being able to "appoint your favorite animal as your camp caretaker."

IP Expansion Initiatives -

Nintendo obviously deeply understands the relationship their customers have with their brand and characters they create. In their 'IP Expansion Philosophy' the company goes out of their way to mention they will "manage quality thoroughly" and "avoid introducing unintended attributes to characters that might limit future game development." This makes clear they intend to carefully maximize the profitability and reach of their existing IP for the long term; however, it is still a small portion of their revenues - something I think might need to shift if they want to thrive in the longer term future.

Other Visual Content -

Apparently Universal Pictures and Nintendo are working to finance The Super Mario Movie

Playing Cards -

Playing Cards accounted for 28 million dollars of their ~12 Billion in sales.

There is heavy competition in the gaming hardware space, game development software space, and subscription gaming space. Despite this, Nintendo has been a household brand name for decades and has consistently produced consoles that change how individuals and families game [Nintendo DS, Nintendo Wii, Nintendo Switch]. Currently, Nintendo holds a unique position of selling the Switch which is a semi-mobile console built for multiplayer interactions. Sony and Microsoft have their own battle going on, so Nintendo has been able to lock in its position as a sort of alternative console maker for games they own and developers who want to release their games to the Switch audience. There are pros and cons to this approach, but contingent on them constantly improving their servers, service, and games, I believe Nintendo is in a great spot to capitalize on IP like Fire Emblem, Pokémon, etc. I believe the brand power behind those names is some of the strongest of any brands in the world and will serve as the base for the future of their business. They must still allow popular titles that they do not own to be accessible on the Nintendo E-Shop, but otherwise I think they can continue to grow their user base until the Nintendo Switch 2 model is released. They have been forward looking, investing in R&D for the future, and have been profitable so I am going to keep an eye on Nintendo this year given all of the hype around gaming.