Nintendo (OTC:NTDOY) has captivated multiple generations with numerous video games. The company has launched many series and spinoffs that have been received very well. However, NTDOY stock can still be a hidden gem and soar if it becomes more involved in the movie industry. Investors have enjoyed the stock’s 127% gain over the past five years, but more growth is available. While I am currently neutral on Nintendo stock, I can become bullish if the company makes a big, prolonged splash with movies.
The Super Mario Bros movie exceeded $1 billion at the box office and offers a small hint of the company’s potential in the industry.
Nintendo Can Solve the Gloom in the Box Office
The box office has been declining since before the pandemic. While other industries are inching closer to pre-pandemic activity or even surpassing those levels, the box office remains behind. Revenue from 2024 is currently down from the same time last year.
This continues the trend of a slower November 2023, which featured a 12% year-over-year decrease. Movies aren’t doing as well on their releases. Major studios like Disney (NYSE:DIS) and Warner Bros (NASDAQ:WBD) have experienced big box office losses in 2023.
Fewer people are going to the theaters, but movies like Super Mario Bros, Barbie, and Oppenheimer demonstrated that moviegoers can show up in force for the right movie.
A big reason for the box office’s struggles is the declining quality of Marvel movies. Ever since Iron Man came out in 2008, the superhero genre became a cultural sensation and peaked after the release of Avengers: End Game in 2019.
Since then, mainstays like Marvel, DC, and Star Wars have fallen out of favor. Movies from these iconic franchises aren’t the same guaranteed hits that they used to be. Studios are in flux as they try to figure out new ideas to fill in the gap.
While studios can try to figure out what works, Nintendo already has a winning formula. The Super Mario Bros movie demonstrated a strong demand for faithful adaptations of classic video games. Nostalgia is strong and now spans across an entire generation of people who can buy goods and services.
Movies Can Drive More Demand for Video Games and Vice-Versa
The Super Mario Bros movie incorporates several elements of previous video games within the series, such as the game based on the movie and Mario Kart. Seeing elements of these games on screen can encourage people to buy new titles and older games.
Having more people play video games will help Nintendo’s financials and can also drum up more excitement for movies. This creates a positive feedback loop where more people watch movies and play video games.
Nintendo noticed the success of Super Mario Bros and is working on a Legend of Zelda movie. Another big hit can prompt the company to release multiple titles per year. Nintendo has enough intellectual property to fill the box office void, enough good stories to produce good movies, and enough nostalgia to attract moviegoers.
Nintendo also has a model via Super Smash Bros to incorporate multiple characters in the same movie. This avenue can lead to more spinoffs and make fans interested in new characters and their stories. The video game giant’s good timing can help it dominate the box office for a decade while rewarding shareholders.
If Nintendo builds a deep enough catalog, the company can even consider launching a streaming platform. While this is a bit of a reach, and most streaming firms are unprofitable, it’s an interesting idea to consider.
Nintendo will have more opportunities to explore if it releases numerous movies. It’s another way to bring more people into the Nintendo ecosystem, increase the lifetime value per customer, and keep fans engaged.
Is Nintendo Stock a Buy, According to Analysts?
Nintendo is currently rated as a Moderate Buy. Two analysts gave the company a Buy rating, while one analyst gave the stock a “Hold” rating, although none of them gave price targets for the stock. The company doesn’t have many analysts covering it for now.
The Bottom Line on Nintendo Stock
Nintendo has a vast library of content it can pull from to create big-hit movies at the box office. The successful release of Super Mario Bros hints at a sequel, and news about other movies in production indicate that Nintendo is taking this opportunity seriously.
Nintendo hasn’t done much to capitalize on the big screen and has a large addressable market thanks to its successful video games. Revenue and earnings can pick up considerably and provide more value to shareholders.
The stock has already performed well and has more than doubled over the past five years. For the most part, Hollywood Studios aren’t filling box offices with top-tier films or reliably offering good choices. Nintendo can consistently create good movies and turn them into a meaningful segment within its business model.
