Video Games

Nintendo's market cap doubles to $42 billion since Pokemon Go launch

Reuters with CNBC.com
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Shares of Japan's Nintendo Co soared another 14 percent on Tuesday, more than doubling the firm's market capitalization to 4.5 trillion yen ($42.5 billion) in just seven sessions since the mobile game "Pokemon Go" was launched in the United States.

The phenomenal success of "Pokemon Go" - now available in 35 countries, the majority in Europe, and most recently in Canada - has triggered massive buying in Nintendo shares, surprising even some seasoned market players.

"I've never seen the trend of such a big company's shares changing so quickly in such a short period of time," said Takashi Oba, senior strategist at Okasan Securities.

Nintendo shares ended Tuesday up 14.4 percent at 31,770 yen, bringing its gains to more than 100 percent since the launch of the game on July 6. Its market capitalization means it is now narrowly larger than Netflix, which finished with a capitalization of $42.32 billion at Monday's close, according to Reuters data.

Turnover in Nintendo shares hit 703.6 billion yen, surpassing the record for trading turnover in individual shares it set on Friday, of 476 billion yen.

Pokemon Go app displayed on a mobile device.
Mark Kauzlarich | Reuters

Trading in Nintendo shares roughly accounted for a quarter of the entire trading on the Tokyo Stock Exchange's main board.

The success of "Pokemon Go", unforeseen even by its creators, has boosted hopes that Nintendo could capitalize on a line-up of popular characters ranging from Zelda to Super Mario to strengthen its new foray into augmented reality.

"Virtual reality and augmented reality have been a focus of the market but hardly anyone was expecting Nintendo in this area. Suddenly Nintendo has become an AR-related stock," said a fund manager at a Japanese asset management firm, who declined to be named as he is not allowed to discuss individual shares.

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The fund manager said the big gains were justifiable considering the likely boost to Nintendo's bottom line.

"Under my rough estimate, the sales from 'Pokemon Go' and upcoming related gadgets will boost net profits by 50 billion yen. Based on that assumption, Nintendo is traded at 30 times profits, which is not unreasonable," he said.

The popularity of "Pokemon Go" is producing an unexpected boom in some shares that have a scant link to the game.

Shares in First Baking Co, a bakery firm with annual sales of 25 billion yen, saw its shares rise 18 percent on Tuesday as the firm sells "Pokemon Bread" among other breads wrapped with character-decorated bags.

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