Coverage: Pokeman Go craze drives Nintendo stock price

Nintendo Co. Ltd.’s shares soared again on Monday, bringing market-value gains to $7.5 billion in just two days as investors cheered the runaway success of Pokemon Go, its long-awaited venture in mobile gaming.

Takashi Mochizuki and Sarah Needleman of The Wall Street Journal have the news:

“Pokémon Go,” which was released less than a week ago, already ranks among the most-downloaded and top-grossing smartphone apps. But its sudden success is raising questions about the privacy and security technologies fueling the game, as well as the physical risks of playing it.

The smartphone app lets players scour parks, subway stops and other locations for cute monsters. It uses a technology called augmented reality, which blends digital images with a person’s view of the real world through the phone’s camera. The technology is the main feature behind a coming headset from Microsoft Corp. called HoloLens.

The game has been available for devices running Apple Inc.’s iOS and Google’s Android in the U.S., Australia and New Zealand since Wednesday. In the U.S., it has racked up more than two million downloads on iOS devices and is generating roughly $1.6 million in revenue daily from in-app purchases, according to market researcher Sensor Tower Inc.

Nintendo shares surged 25% in Tokyo on Monday—a welcome relief for the company after the unsteady launch of its first mobile app, Miitomo, in March. Much attention has swirled around games potentially involving Nintendo’s signature characters such as Mario.

Steve Schaefer of Forbes notes that the increase in market capitalization outweighs the value of the game:

With properties like Super Mario Bros., Donkey Kong and Star Fox, Nintendo seems to have a rich vein to tap for mobile games beyond Pokémon Go and two others it has already announced for later this year. The stock though, is already pricing in success well beyond the hyped-up launch.

Still, even if investors presume that Pokémon Go and its successors will have a shelf life — the game’s novel augmented reality gameplay is undoubtedly part of its initial appeal — the  profit picture doesn’t justify the spike in Nintendo’s stock.

Nomura analysts Junko Yamamura and Yoshitaka Nagao calculated Pokémon Gocan boost Nintendo profits by one or two billion yen (about $10-20 million) annually, since the game was actually developed by partner Niantic and Nintendo has just a 32% stake. “The recent share price rally accordingly looks excessive based on profits from Pokémon Go alone,” Nomura says.