Nintendo shares surged more than 16% on Friday after Tencent won approval to start selling the Japanese gaming giant’s Switch console in China.
Chinese consumers have typically favored computer and mobile games over consoles. That’s because the government only lifted a 14-year ban on consoles in 2014.
While Microsoft and Sony haven’t built huge console businesses in China with the Xbox and PlayStation, Nintendo could have a better chance because of its game portfolio and the portable nature of the Switch.
“Nintendo sits on the gaming world’s most valuable and unique IP (intellectual property) treasure trove,” Serkan Toto, CEO of game industry consultancy Kantan Games, told CNBC.
“The game portfolio is totally different from Sony and Microsoft, which appeal to hardcore gamers — who in China play on the PC. The Switch is a portable device, which fits nicely with Chinese users’ penchant for gaming on the go,” he added.
As the largest gaming company in China, Tencent could be a strong partner. The Chinese technology giant is responsible for some of China’s biggest mobile hits like “Arena of Valor.” Investors will be hoping that Nintendo can work with Tencent on a mobile strategy in China.
“Nintendo has yet to launch any of its mobile games in China and we believe that the potential of Nintendo’s mobile game business in China is significantly larger than its console business,” Ahmad said.
Shares of the Japanese gaming firm have trading fairly flat recently after it slashed its sales outlook for the Switch in February and as new gaming products such as Google Stadia have been announced. Google Stadia is the search giant’s game streaming platform.
Friday’s share price move means Nintendo stock is up about 36% so far this year.