Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) Is Today's Top Short Pick

Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) is a real conundrum stock right now. The company rocketed in July on the success of Niantic's Pokémon Go application, but soon corrected as markets settled out of frenzy and realized that – near term, at least – the Japanese video game and console maker isn’t set to benefit too much from the renewed attention in the franchise. It makes practically nothing from the application itself (a bit in licensing and some from a small holding in the developer company) and is reliant on things like merchandise sales, renewed interest in the Pokémon legacy games and related platforms and other satellite associations for any boost to its top line.We think near term there's going to be some pressure on the company's stock, and this pressure is going to continue well into 2017. Nintendo stock is down 65% on its 2007 highs, even with the Pokémon spike, and when we look back on the stock ten years from now its highly likely that this current flurry of shares trading hands will be nothing more than a temporary correction on a longer term demise.Why?Well, first up, Pokémon Go is in decline. Daily active users of the game are down 35% from their peak. Daily downloads are down 70%. Users are spending less time per day and week on the application. School is back in, winter is on its way. The logistics of finding time to go outside and walk around to play the game will become very difficult to maintain across the next six months, when compared to the last couple, and this is going to hit play figures even harder. Even if kids want to go out and play, the weather and school day will stop them doing so. Yes, as highlighted, this won't affect Nintendo directly. Indirectly, however, the waning interest will affect the above mentioned satellite benefits.This isn’t all, however. Forget Pokémon for a minute.Nintendo is set to release a brand new flagship system next year, the Nintendo NX. The company has long held a distant third position behind Sony Corp (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) when it comes to consoles, and with the latter two set to release cutting edge hardware near term, many view this effort as Nintendo's last ditch effort to maintain market share. The problem is, the company is going about the release in a very unusual way.The gold standard of the console release space is an announcement during the first couple of quarters of the year, a high profile demonstration at the E3 conference in the summer, followed by a fall release to capitalize on holiday sales. This is what Sony and Microsoft (nearly) always do. And it works. The pre-release announcement and the summer demos give markets six months or so to get excited, and then the pre-holiday release brings in a flood of sales.In contrast, Nintendo is releasing its next flagship system, the NX, in March of next year. Further, we know practically nothing about it. There's been no demo, and it will be released too early to capitalize on the E3 next June. Not only this, but the timing is going to weigh on sales this coming holiday period. It's current flagships, the 3DS and Wii U are going to suffer. Why? Because who wants to buy hardware just two to three months before a major update hits the shelves?We see a weak holiday period followed by a flagship launch that is flattened by a general lack of excitement about the product.Pokémon is propping up Nintendo right now, and while there's probably still some juice in the craze, it is only going to last so long. When it runs out, Nintendo is going to return to its lackluster hardware performance and its resulting shallow, but definitive, decline in relevance.Stick with us for more insights into the stocks markets are talking about – subscribe to our newsletter below!Disclosure: We have NO position in NTDOY and have NOT been compensated for this article.