The enormous success of Nintendo's (OTCPK:NTDOY) Pokemon GO game sent the stock shooting up 25% over the weekend, adding $7.5 billion to its market cap. You might still get in for some gains, but there are other ways to play, and win.
One way is through ZAGG (NASDAQ:ZAGG). This is a publicly-traded phone accessories and repair chain. It is best known for a line of protective covers, great if you're so focused on chasing something on your phone you drop it. It rose 3.5% on Friday and starts trade at $5.26/share.
ZAGG is in the process of integrating battery case maker Mophie into it, having announced the purchase in February for $100 million. It now forecasts sales for the year of $460-500 million, gross margins in the low-to-mid 30s, and EBITDA of $60-65 million supporting a market cap of $153 million. Zacks is pounding the table for the stock, saying it could triple.
There are other, related companies you can look at as well. Universal Electronics (NASDAQ:UEIC) has been rising while ZAGG has been falling, and Skullcandy (NASDAQ:SKUL) generates more revenue per employee. But some of this is getting deep into the weeds - UEIC makes remote controllers, SKUL distributes high-end gaming accessories and headphones.
More important to your portfolio is what this means in terms of broader technology trends. Pokemon GO is the first consumer success for Augmented Reality, in which computer-generated images are overlain on live video. It's free to play, works on existing devices, but Nintendo is selling a Bluetooth accessory called Pokemon GO Plus that can be worn on a wristband.
The sudden craze has some people walking into traffic, thieves using it to catch real victims, and all sorts of hilarity, like a gay-friendly Pokemon appearing at the infamous Westboro Baptist Church.
Nintendo had to pause its international rollout due to server overload - it's working with an Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) spin-off called Niantic on it -- and it's already the top-selling game on the Apple (NASDAQ:AAPL) app store. Alphabet and Nintendo both have a stake in Niantic through a $20 million funding round, and Alphabet is up a whopping 13% over Thursday's close.
So what have we learned? Augmented Reality is the next big thing in gaming. You don't need, but might buy, accessories for the new craze. This thing is big enough to crash clouds. Everyone in the gaming space is about to furiously upgrade their Free to Play lines so they work with AR. A new gaming goldrush is on.
Catch them all.
Disclosure: I am/we are long AAPL, GOOGL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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