Many sectors are cyclical, moving in and out of favor depending on market conditions and consumer demands. One of the more interesting cyclical sectors is the video game sector.
Earnings for video games can roll in as a big new game is released. Most developers try to build franchises that can sustain regular releases to create big revenue. But there’s another wave that can benefit as well.
That’s the console wave. Every few years, the latest generation of consoles come out. And it usually means a boom for the companies that manufacture them. The next console coming out is the Switch 2 from Nintendo (NTDOY).
Nintendo’s intellectual property of family-friendly games and runaway success in the handheld console sector could be attractive for shares. That’s because Nintendo will profit from both console sales and game sales.
The stock has already been rising in anticipation of the new console, but should trend higher following release as its revenues and earnings rise on the results.
Action to take: Investors may like Nintendo shares here, ahead of the Switch 2 release. Nintendo shares also pay a 1.6% dividend at current prices.
For traders, Nintendo trades on the pink sheets in the U.S., so options aren’t available for trading. Traders may want to look at video game developers for an options trade in the video game space.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.