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Nintendo's stock is hot again, stealing attention from Goldman's upgrade of Sony on Tuesday, after Nintendo guided its current fiscal year earnings and dividend higher yesterday and analysts responded with higher target share prices today.

Both Merrill Lynch and UBS placed a ¥33,000 ($34.29 ADR equiv. at ¥120.3/$1) target on Nintendo (OTCPK:NTDOY), while Nikko-Citi was most bullish with a ¥36,000 ($37.41) target.

Nintendo had been trading lower in '07 despite rumors of strong sales and continued insatiable demand for its Wii console.

In addition to the Wii, we learned yesterday Nintendo is experiencing sustained robust demand for its DS handheld.

In reaction to Sony's (SNE) upgrade (1/9) and regarding Nintendo, I wrote:

In terms of video game consoles, I continue to like Nintendo the best and think recent weakness in its share price can be attributed to expected profit taking. If it were to correct by more than 10%, (it hit an intra-day all-time high of ¥31,200 ($32.75 ADR equiv. at ¥119.1/$1) on Jan. 4 and an all-time closing high of ¥30,900 ($32.43) on Dec. 29.) it might be worth considering. Closing down 0.94% today to ¥28,510 ($29.92), makes for an 8.6% correction. Its ADRs closed yesterday at $30.10.

So much for a 10+ percent pullback! Nintendo's ordinary shares (Tokyo: 7974) gained 5.86% today to close at ¥30,700 ($31.90) -- it gained 1.72% yesterday.

The Nikkei meanwhile continued to struggle as selling was particularly heavy in the afternoon session, sending the Nikkei 225 Stock Average definitively below 17,000 with no hope of recovering the psychologically important level by closing time -- it ended down 0.62% at 16,838.17.

Sony shares were sold along with the broader market in afternoon trading, but recovered before the market's close to nearly finish flat, -0.18% at ¥5,430 ($45.14).

Keep an eye on the ¥/$ forex rate. If it trades above ¥115 at the end of March, then you have to figure Nintendo will benefit from forex gains. In fact, the biggest (%) forex gains could come from Europe, where Nintendo is maintaining a target rate of 1 Euro = ¥143, compared to the current level of 1 Euro = ¥156.


Nintendo (OTCPK:NTDOY) and Sony (SNE) 1-year comparison chart:

Nintendo-NTDOY-Sony-SNE-1yr-chart-01-10-07

Disclosure: The author does not own shares of any companies mentioned in this article.

Source: Nintendo Surges on Analyst Target Hikes as Nikkei Slumps