Has the Pokémon Go Stock Craze Returned to the 1990s?

July 19, 2016 by Jon C. Ogg

smartphone troubles
Source: Thinkstock
If you are young, chances are pretty good that you may be a part of the Pokémon Go craze. To an adult who has seen trends for more than a decade, this has many of the same hallmarks from when Pokémon launched and took off in the 1990s. If there is a big wave of spending around a new (or regurgitated) topic, chances are high that investors and speculators will be jumping in and out of companies and stocks around that craze.

Keep in mind that the Pokémon Go is still a day away from launching in Japan.

The Pokémon Go craze has been a key driver of some stocks in recent days. While this has been a win for the companies involved, 24/7 Wall St. wanted to see if some of these stocks have now run up too much.

Before you assume that this is an attempt to call a peak, it is not. Far from it. Some companies may peak in days, but historically some of the old Pokémon craze stocks peaked on a rolling basis over a much longer period.

Pokémon goes back to the 1990s. and when it began to take off then it created a stock move in many companies. Most of those companies are no longer around, or if they were they are no longer public or no longer involved in Pokémon. When those stocks ran in the late 1990s, they often saw share prices rise for quarters as it sometimes created a slow grind higher rather than an instant surge.

Nintendo Co. Ltd. (NTDOY) has seen its shares ramp up massively as the prime beneficiary of the Pokémon Go augmented reality craze. Just on July 6, this OTC-listed American depositary share (ADS) was at $17.63. The shares have more than doubled, peaking at $38.25 on Monday. Its stock price was down 4.5% at $35.67 late on Tuesday. Its new 52-week range is $15.34 to $38.25. Please see a more detailed research report summary below.

ZAGG Inc. (NASDAQ: ZAGG) was last seen up almost another 6% at $6.99 late on Tuesday. This is ongoing enthusiasm over hope and evidence that more battery cases will be purchased by those who are using Pokémon Go and burning through their batteries much faster than they would be otherwise. ZAGG was trading at $5.24 on July 6, so its gain has been over 30%. Roth Capital recently suggested that Pokémon Go might add 15% to ZAGG’s earnings, but the firm only raised its target on the stock to $6 from $5.

GameStop Corp. (NYSE: GME) probably sounds like a loser here rather than a winner. Pokémon Go is a download so it does not need to be bought at a store like many traditional video games. Still, GameStop’s CEO has said that sales in some stores have doubled, due to how much merchandise GameStop sells as some stores have been set up as a gym or a stop. GameStop’s CEO also said on a CNBC appearance that GameStop is one of the largest distributors of Pokémon collectibles and games. Its shares briefly hit $31 on Tuesday, versus about $26 on July 7. GameStop’s 52-week range is $24.33 to $47.83, and its consensus analyst price target is $35.82.

McDonald’s Corp. (NYSE: MCD) is winning indirectly on Pokémon in Japan via the publicly traded McDonald’s Japan (ticker 2702). Dow Jones showed that its shares were up 8% in Tokyo on Tuesday, and the stock was up 25% so far in 2016. For a comparison, the parent McDonald’s is up about 5% in 2016. That being said, McDonald’s is already a Dow Jones Industrial Average stock with a $111 billion market cap. How much it will win from Pokémon meals remains to be seen.

Niantic Labs is tied to both Nintendo and Alphabet Inc. (NASDAQ: GOOGL). It was effective spun out of Alphabet in 2015, but Alphabet has a financial stake in the augmented reality outfit. As with McDonald’s, or even more so, the former Google (Alphabet) has a market cap north of $500 billion. With shares at $753.07, its 52-week range is $593.09 to $810.35.

Amazon.com Inc. (NASDAQ: AMZN) may have a great cloud business, but one can never forget that its retail presence is an all-eating machine versus other retailers. And if you log on to Amazon under Pokémon items for sale without specifying what category, you get a whopping 327,563 results. Amazon’s market cap is nearing $350 billion, and with shares at $738.75, its 52-week range is $451.00 to $757.34.

Another beneficiary would be the cellphone carriers, but likely all of them equally with data plans having to be expanded and with the companies selling more peripherals in their physical stores. That means Verizon, AT&T, T-Mobile US and Sprint. With people using GPS and using other issues for the networks, people who have limited or capped data plans, or shared plans, might tip over the limit. It was reportedly only eating 10 megabytes per hour, but that may be a generality. T-Mobile US Inc. (NASDAQ: TMUS) has announced an increase to unlimited Pokémon Go data as a gimmick to win new subscribers.

If you wanted to see more research for Nintendo, on July 12 Jefferies maintained its Buy rating on Nintendo shares in Japan. The firm’s take is that Pokémon Go is just a tip of the IP iceberg. Its key takeaway was a 30,000 yen price target, as follows:

It is not about Pokémon Go. The reason we like Nintendo and remain Buyers is because its stock at ¥14K was valuing it at EV of c.$5b (below that of King and Supercell acquisitions). The value of its IP can only be unlocked on mobile and, from this month, it has just started that journey with Pokémon Go. There is lot more to come, which we believe will further validate our belief that Nintendo’s game development prowess is unmatched.

I'm interested in the Newsletter
 

Again, this is not meant to say that the Pokémon Go stocks have no more legs. Chances are high that other companies, and some highly speculative companies at that, will make Pokémon announcements of sorts ahead. If history is a barometer, those shares may benefit from this. Just remember one warning about stock crazes: nothing lasts forever, and when the speculators start leaving it often gets real ugly.