The video-game sector is getting scary. We've all been hearing reports about slowing sales and stagnant stock prices in the industry. Wait, did I just say stagnant stock prices? How about plunging stock prices?
I myself have been hit by bad news in this area. Earlier today, Wal-Mart Stores, Inc. (WMT) fired a shot at competitor GameStop (GME). Looks like some kind of pricing war could erupt. Great for consumers, bad for my portfolio! I am currently in a trade with GameStop, and I am not happy.
Well, those who own Nintendo Co., Ltd. (NTDOY) are experiencing discomfort of their own this afternoon. My screen shows them down $1.22, or 4%, to $29.37, or right near the 52-week low, at the time of this writing. Not only is the Wal-Mart news probably helping in the sell-off, but the market is surely paying attention to the fact that production activity on the Wii appears to be contracting, as this item over at CrunchGear mentions.
I support Nintendo management's decision on reducing Wii output, although I think the powers that be probably should have been ahead of the curve on this one. Wii availability most likely could have been reduced a lot earlier on in anticipation of the current scenario. Lesser product in the marketplace may have kept erosion of demand, and thus the need for further price cuts and promotions, at bay for at least a little while longer.
Nintendo does seem to bounce back above $30 once it goes below that level, so I bet many traders are examining the potential for a trade. I definitely see the value of that, but I must admit, my confidence in the Wii and other consoles has been hurt by my GameStop play.
I'd keep an eye on Nintendo, but I believe all investors must be very careful now when buying any stock related to video gaming. This isn't like buying ahead of a new console cycle, remember. The new console cycle is becoming older every day...
Disclosure: I own GameStop; positions can change without notice.
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Reader Comments (Page 1 of 1)
12-02-2009 @ 5:47PM
ralphpal said...
The reason the WII is not selling is that its not made for gamers. Its made for very young kids. Whereas Sony Playstation and Mircosoft Xbox has much better games.