Videogame giant Nintendo saw its shares suffer their biggest one-day fall in a year on Wednesday after it slashed its Switch console annual sales forecast by nearly 10%.
The Kyoto-based company cut its sales forecast for its leading console to 19 million units for this business year on Tuesday, from 21 million, as microchip shortages constrained production.
However, Nintendo President Shuntaro Furukawa told an earnings briefing that chip supply had started to recover in recent months, helping boost Switch production just as the industry heads into the busy year-end shopping season.
Sony Group Corp, maker of the PlayStation 5 console, also signalled this month that supply chain snarls that had hampered its games business were easing.
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Nintendo’s Furukawa told a separate briefing on Wednesday that Switch demand and sales momentum remain solid despite supply constraints, and that the company is striving to bring as many consoles as possible to consumers in the holiday season.
Still, Nintendo’s share price was down 6.83% in Tokyo trade, against a nearly flat broader market. That was its biggest one-day drop since October 2021.
“The Switch hardware cycle peaked [in the last financial year] and we believe that revenues, profits and valuations will now struggle to reach new highs in this cycle,” wrote independent analyst Mark Chadwick who publishes on the Smartkarma research platform.
“There aren’t any more catalysts to play out before the release of the Legend of Zelda,” he said.
Legend of Zelda Boost Hopes
Nintendo plans to launch the latest instalment of its widely emulated action-adventure series, ‘Legend of Zelda: Tears of the Kingdom’, in May 2023.
Nintendo, which earns about 80% of its revenue overseas, also on Tuesday raised its annual net profit forecast due to a weaker yen but still missed analysts’ consensus forecast.
Furukawa said at the Wednesday briefing that the yen’s sharp and prolonged depreciation has hit profitability in its hardware business in Japan, hinting a possibility of price hikes.
“We have no plan at the moment to raise Switch prices. But the yen’s depreciation is going on for longer than expected and at a larger-than-expected scale. We will keep an eye on the situation and carefully consider the matter,” Furukawa said.
Shares of Nintendo are up 8.3% so far this year.
- Reuters with additional editing by Sean O’Meara
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