Before running for the hills at the mere sound of the words 'consumer electronics', let's discuss the reasons to be bullish on this stock:
The Nintendo Wii. Nintendo (OTCPK:NTDOY) is positioning itself to become the runaway winner for the console battle among video game console makers. This underdog is gaining momentum quickly. With its pricing coming in at $250 (maybe even $200), it is running $300-400 less than the Sony and Microsoft Xbox360 consoles.
With a slowing economy and consumer spending, people will turn to the buzz generated by Nintendo and its console that costs half price. I expect Nintendo to run away with this. The Wii has an iPod feel to it. And it's a fresh new perspective that I think gamers are looking for. People are not going to go for extreme graphics -- they have reached a peak. New and entertaining is what Nintendo brings to the table and it will sell. Not to mention they are trying to appeal to a broad-based casual user.
The opportunity here could be tremendous. A quick look at almost any review of the product (especially the E3 conference) will reveal glowing admiration for the Wii. Newsflow from Nintendo alone will begin to propel Mosys. Not to mention an upcoming announcement of a new IDM contract with a major customer.
Looking back at history reveals some interesting perspective. Back in 2002 Nintendo was then Mosys' largest customer, as they licensed a similar graphics processor technology to Nintendo (through NEC) from the Gamecube. Preceding the Gamecube release, MOSY ran up above 20 shortly, only to fall back as Gamecube clearly flopped. However, Wii is setting up to be a home run, and not a flop.
In 2002 with the Gamecube, a third-place finish in the Console battles was all but assured. Wii should be different, bringing a revolutionary new aspect to gaming through motion sensory controls.
Keep a close eye on this name. Charts may be bearish, but it just completed a head and shoulders top. And the fundies are very bullish here. This is a name that should be owned heading into the holiday season.
Even if you're bearish on the consumer, Mosys is an interesting play, as a weakened consumer could spell success for their heavily discounted, yet revolutionary product.
NTDOY.PK 1-yr chart:
MOSY 1-yr chart:
Full Disclosure: I am long MOSY.