Nintendo shares are down 25% since Jan. 1, but a careful look suggests that they're due for a comeback, with profits at the cash-rich company likely to be up 45% this year.

Nintendo's refreshed product line-up and demand for its popular, interactive Wii consoles give the computer-game maker a leg up on the competition, Alger's Chung says. A new DS (dual-screen) handheld-computer game with increased wireless capability and steady demand for the Wii version of the extremely popular Guitar Hero game also bode well. While demand for computer consoles and game software will fall, Nintendo has an advantage: Its products cost less to make than Sony's Playstation or Microsoft's Xbox. And high license fees charged to third-party game developers provide an added revenue cushion. "Nintendo fundamentally is a striking opportunity," Chung says. The shares trade at around 14 times fiscal year 2008 earnings, and Chung predicts that the company will double FY 2009 earnings to $4.27. Plus, the company has roughly $11 billion in net cash, about a quarter of its market cap. Chung sees the shares hitting the 55 to 65 range within a year, up from near 39.

Addicted to gaming? Nintendo has the purest sweetest smack.

top of niche

Or you could play Nintendo (NTDOY), although I think the trade on the console side is nearly over. -- Jeff Macke

WII.
Impossibly chic and gorgeous and it's the big winner.

always been a big fan

GameStop's Wii Deal Another Sign of Strength
Brittany Umar and research analyst Michael Comeau discuss GameStop's new deal with Nintendo and why this company is still going strong.

Click here to watch the video.

growth

Recommended--new game products best of breed/