TOKYO -- As Nintendo continues to soar on the runaway success of "Pokemon Go," some market watchers are sounding the alarm over the stock's equally runaway valuation.
"I trade 5 billion yen to 7 billion yen [$47.1 million to $65.9 million] in daily value, and I earned a total profit of about 50 million yen," a retail investor here said of Nintendo. Turnover of the video game company accounted for about 30% of Friday's total on the first section of the Tokyo Stock Exchange. The stock price has roughly doubled since July 8.
Already a household name, Nintendo readily drew individual investors with its latest smash hit. Funds investing through high-frequency trading have also joined the fray, adding steam to its historic gains. Excess cash generated by the Bank of Japan's massive monetary easing program is also lubricating the bull run.
But Nintendo's earnings windfall from "Pokemon Go" may not live up to market expectations. The company owns just 32% of Tokyo-based Pokemon Co., which is entitled to a licensing fee from U.S.-based game operator Niantic. Nintendo said Friday that "Pokemon Go" will have only a "limited" impact on consolidated earnings.
Nintendo's price-earnings ratio nevertheless shot up to 97. The P/E ratio of McDonald's Holdings Japan, whose fast-food restaurants become official "PokeStops" and "gyms" under a tie-up, climbed to 481. Both multiples dwarfed the TSE first-section average of 15.
"Citing uncertainty over 'Pokemon Go's' lasting popularity, some retail investors are resorting to early profit-taking," said Tomoichiro Kubota, senior analyst at Matsui Securities. The heated Pokenomics rally could turn into a painful correction.