While video game sales break new records all across the world,
video game stocks have seen better days.
American publishers Activision (ATVI), Electronic Arts (ERTS), Take Two (TTWO) and THQ (THQI) have all seen their stocks dramatically fall
over the year. The latter has had the worst hit, sinking 86%
in a year while others have been cut by over half their peak values
in 2008. Many analysts and investors see the rise of Nintendo
(NTDOY.PK) as being the main culprit. Nintendo's
Wii and DS have seen dramatic sales and persistent shortages due to
demand. You would think that would mean for an expensive
Nintendo stock?
Wrong. Nintendo just dropped another 6.5% on the Tokyo
Stock Exchange to 30,200 yen in overnight trading. In the
beginning of 2008 it went to as high as 64,500. Perhaps this
is due to the fact that sales of Japanese video games are not
performing as well as they are in the United States. The Japanese
may therefore be having a difficult time believing that with
America's economic turmoil, Nintendo games will continue to perform
well. Indeed, trade volume of Nintendo stock in Japan is
consistently low in the world's second largest economy, while
Nintendo's ADR in the United States trades at similar volume
relative to value, suggesting that there is actually more interest
to trade Nintendo in the United States.
That kind of a statistic is problematic, given that America's
Nintendo ADR will tend to follow the Japanese stock performance,
not the other way around. Japanese video game publishers like
Capcom and Square Enix Holdings, Inc. have also seen dramatic cuts
in their…