Apple Inc Strikes Gold with Pokémon Go
Apple Inc (NASDAQ:AAPL) can make a proverbial manure load of dollars from “Pokémon Go.” The Pokémon Go app became available barely a week ago and already it’s made tsunami-sized social media waves worldwide. But the effects aren’t limited to people accidentally ending up in lakes or in fender-benders. A few companies and shareholders are getting unexpected returns. Apple stock is potentially one of the big movers as a result of the Pokémon phenomenon.
Pokémon Go hasn’t even been released worldwide yet. In fact, the app just became available in Japan, where the characters originated. Still, it seems anywhere smartphone users have downloaded the Pokémon Go app, the main companies involved, which includes Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) rake in tons of dollars. It’s a profitable strategy that has benefited other top market names. Certainly, Apple stock is one of the Pokémon Go winners.
Nintendo Popped 120% on Pokémon GO
The millions of users worldwide who get the Pokémon Go app courtesy of the “App Store” end up making Apple stock billions in app hosting fees and revenue from the app. This means that Apple Inc., in the best Monopoly game style, gets to collect the proverbial $200.00 on passing Go—Pokémon Go that is.
According to a recent report by Laura Martin of Needham, Apple can expect to earn an additional $3.0 billion over the next two years from the Pokémon app alone. It’s simple math, suggests the report. You see, Apple first charges a fee to the app creators to host the app in its App Store, but it also gets 30% of the revenue made on in-game purchases. For context, consider that the smash hit mobile game “Candy Crush” contributed some $2.0 billion to Apple’s revenue. (Source: “Apple will make $3 billion playing Pokémon Go,” MarketWatch, July 21, 2016.)
Niantic, rather than Nintendo, developed the Pokémon Go application and will reap those rewards. However, dear reader, don’t go crying for Nintendo just yet. It still collects some 32% of Pokémon Go–related revenue gains. Having said that, Nintendo’s perhaps more lucrative Pokémon-related benefit will occur later, when the company releases its next game console. Apple, on the other hand, benefits more directly in actual revenue.
This Is Good News for Apple Stock
Apple stock needs some stories to boost value for its shareholders. The company’s finances are far from hitting rocky shores, but there is a perception that the “iPhone” has lost its desirability factor—or, more likely, that the market is simply too saturated, considering the ever-growing variety of competition in that market.
The “iPhone 7,” expected to be released in September, will likely push Apple stock higher. For the time being, though, Pikachu and the rest of the Pokémon gang might contribute a decent boost to AAPL stock.
Last April, Kulbinder Garcha, an analyst at Credit Suisse, suggested that one of the reasons Apple stock was down was that shareholders had undervalued Apple’s potential gains from apps and services. At that time, Apple reportedly earned some $14.5 billion from such streams, which was four times what it was raking in from apps and services in 2010 ($3.2 billion). Users are also spending more at the App Store. (Source: Ibid.)
As it happens, Apple shares have climbed, though not in a way people will want to write home about. That’s also because few have yet realized the significance of the Pokémon Go effect. Indeed, apart from the game itself, the Pokémon Go success may open the gates to more apps of this type, putting a smile on Apple’s treasurers and shareholders’ faces.
Apple Stock Will Probably Have to Wait Until the Next Quarter
Apple will likely see the biggest boost from Pokémon through an earnings surprise to the tune of Pikachu!
Still, there’s time yet for an AAPL gain. Certainly, shares of McDonald’s Holdings in Japan, an independently traded unit of McDonald’s Corporation (NYSE:MCD), gained some five percent in Tokyo the moment the fast food chain announced it was going to be the first official sponsor of Pokémon Go. Sales are simply increasing anywhere the Pokémon app is reaching.
Perhaps, the average AAPL investor is more mature and prefers to wait and see before being sucked in to the Pokémon mania, though. Maybe they fear it’s a bubble. Yet, the potential gains for the App Store are very much realistic.
One thing is certain: after displacing other games and apps on smartphones everywhere, the Pokémon Go craze has started to have some serious effects in the markets—and not only on the shares of Nintendo and Apple. In the longer term, however, Apple could benefit the most from the app’s popularity.