Zelda, WiiU and Nintendo: Skyward Stock or Holiday Sellsword?

Nintendo's (NTDOY) new console, the Wii U, is projected to launch on November 18, 2012, and given the success of the Wii, many investors are wondering if Nintendo's stock would be a hidden gem in their own portfolios. Its predecessor, the Wii, was a departure from traditional videogame consoles due to its motion-based controller. Nintendo managed to strike gold with the Wii, prompting Microsoft and Sony to create their own motion-based controllers and peripherals. However, the Wii was often criticized for its lack of horsepower, relative to the Xbox 360 and Playstation 3. Although it attracted consumers who typically did not play videogames, it lacked the software to draw core gamers.

What's up with the U?

This time Nintendo's innovation is a large, flat controller with a built-in touchscreen, sensors for motion control, a front-facing camera and microphone for video chat, stereo speakers, and rumble feedback. Tech demos have showed off creative uses for this gamepad, such as panoramic views of in-game landscapes. The touchscreen allows the user to play games and control the console directly from the gamepad, meaning someone else can watch TV while the Wii U is in use.

A Console is Only as Good as the Games it can Play

Nintendo's first party offerings seem to be in order, with Pikmin 3 and the tried-and-true legacy of our lovable plumbers in New Super Mario Brothers U. Mainstays like the Zelda series are sure to make a highly anticipated appearance. Nintendo also wants to capture the attention of core gamers—and wisely so—with titles like Bayonetta 2, Assassin's Creed III, and Batman: Arkham City Armored Edition. All in all, the Wii U will have 23 games during its launch window, and currently 85 games are announced. Gameplay can be extended with past titles, because the Wii U will be backwards compatible with Wii software and peripherals. Bottom line? Nintendo will need to secure third-party games on a consistent basis if they want to attract gamers who have stuck with Sony and Microsoft consoles.

Keeping up with the Miis?

Online connectivity is vital in today's game market, and Nintendo has remained fairly silent on about their online plans. Miiverse and Wii U Chat can be used to communicate with other players. Nintendo TV is a cloud-based system adds value to the console by allowed the Wii U to double as a home media device capable of streaming videos. These services should broaden the console's appeal without overreaching and trying to do too much at once.

New Console, or Really Expensive Add-on?

The E3 2011 unveiling of the Wii U was met with skepticism from gamers and investors alike. Nintendo stock dipped, and Bloomberg cited Yusuke Tsunoda, an industry analyst in Japan, as stating "there were high expectations from the new version of the Wii and this fell far short.” People were unsure if the Wii U was a brand new console or just another add-on device for the current Wii. This year's E3 felt like a retread to clarify some of the confusing details of 2011's conference.

Pre-Orders are Sold Out

Recently the console's prospects have improved. The Wii U is available for pre-order with two SKUs: basic ($299.99) and deluxe ($349.99). Pre-orders for both versions of the console have sold out at most retailers, leading to price gouging on websites like eBay. The Wii U will likely be a hot item this holiday season, and hopefully Nintendo will be able to articulate to consumers why the Wii U represents a good purchase. Two of the biggest challenges facing the Wii U are the constant acquisition of fun, compelling software and online services matching those of Sony and Microsoft's consoles. Game developers will need to use the gamepad to create new and innovative ways to play to further differentiate the Wii U from other consoles. Nintendo seems focused on releasing imminent plans about the Wii U rather than their long-term strategy, and with Black Friday approaching might be able to strike gold twice.