Will a decline in Pokémon Go’s daily active users affect Nintendo’s stock price?
Millions of people all over the world were quick to download the Pokémon Go augmented reality game when it launched on 6th July this year. A contender for one of the biggest smartphone game crazes ever, players have to catch Pokémon characters, which are superimposed over their surroundings using their phone’s GPS locator, by searching for them in the real world.
Apple reported that the App Store record for the most downloads in a week had been broken after the game was released in the US, and Nintendo Co. Ltd’s (OTC: NTDOY) shares rose at an astronomical rate by almost 120% in just under two weeks .
However, in just under two months since it’s July release, Pokémon Go has seen a dwindle in downloads and a decline in user engagement. The app had around 45 million daily active users at its mid-July peak, but by 16th August, this figure had already dropped to just over 30 million. As Pokémon Go’s popularity wanes, investors are wondering whether the app will continue to prove popular long term. As such, the rise in Nintendo’s shares has attracted a lot of short interest from investors.
Nintendo’s share price and short sellers
According to Investopedia, NTDOY closed at $17.50 per share on 5th July, the day prior to the app’s launch. By 18th July, the gaming giant’s stock had more than doubled to over $38.25 per share. Nintendo issued a press release on 22nd July informing investors that the company’s earnings would not be significantly affected by Pokémon Go, and reminded them that they are not the sole owners of Pokémon.
When Nintendo’s earning figures were released on 27th July, short interest grew to 4.9%. Polygon reported that Nintendo’s stock price was ‘about 60 percent over its pre-launch high’ on 24th August, making its value the same as it was at the end of October 2015.
Short sellers don’t believe in the app’s staying potential because other mobile games have failed to maintain long term popularity in the past. Furthermore, Pokémon Go has received a lot of negative press as a result of accidents, thefts and other incidents that have happened when users have been playing the game.
Only time will tell whether Nintendo’s stock will remain buoyant, or whether short sellers were right in thinking that interest in the game will soon pass, and long term investment isn’t a savvy option.
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