Nintendo's ADRs (OTCPK:NTDOY) have gained 83% in the past 52-weeks as its ordinary shares (Tokyo: 7974) have gained 96% -- a difference in the yen/usd exchange; no real arbitrage opportunity here at this point. FISCO news of Japan reports the Daiwa Institute of Research sees even more potential upside between approximately 10% to 33% ahead of its new game console launch this November. And don't forget the impact of foreign exchange profits!
Nintendo's ordinary shares closed today up 0.85% at 22,470 yen (ADR equivalent of $24.28). Its ADRs closed yesterday at $23.95 -- remember they are traded as pink sheets at a 1:0.125 ratio.
Daiwa said that the more information Nintendo makes available about its Wii console launch the higher its share price could go as anticipation builds. Based on the launches of previous consoles, Daiwa sees Nintendo's ordinary shares theoretically trading up to between 25,000 ($27 ADR equiv.) and 30,000 yen ($32.40 ADR equiv.). The first amount is based on the Nintendo 64 launch and the second is based on the Super Nintendo.
In separate news, Reuters reports Nintendo expects to sell its Wii in Europe for less than 250 euros ($321.50) according to the firm's head of German operations. I believe this was expected since Nintendo had earlier said the Wii would cost no more than 25,000 yen in Japan ($215) and less than $250 in the U.S. Now there is an opportunity for arbitrage!
The launch date is still undecided but will be set "in due course." The German operations head also said Nintendo hopes 'to sell 4 million units of Wii globally by the end of the year, and reach sales of 6 million by the end of March 2007.' Rival Sony (NYSE:SNE) is set to launch its PlayStation 3 in the U.S. on November 17th.
Nintendo made about 17% of sales in Europe in the year ended this past March. With the yen trading at an all time low against the euro (currently at 149.00 yen a euro), Nintendo's foreign exchange profits could provide an even more substantial boost to earnings -- in its last fiscal year foreign exchange profits totaled over one-half of both operating and net income. In its Q1 earnings release on July 24th Nintendo said it estimated exchange rates of 140.00 yen to 143.00 yen a euro and 110.00 yen to 115.00 yen a dollar. The current yen/usd exchante rate is Y116.30/US$1.
Nintendo Co Ltd (OTCPK:NTDOY) 1-year chart: