Nintendo’s fourth-quarter profit falls short of expectations, shares plunge 3%

Nintendo’s share price plunged on Friday. The day before, the company reported fourth-quarter operating profit that fell short of analysts’ expectations. Shares in the game maker fell 3.5 percent to 40,770 yen in Trading on the Tokyo Stock Exchange on Friday. Nintendo’s U.S. shares fell 2.97 percent to $47.35 on Thursday.

Nintendo's fourth-quarter profit falls short of expectations, shares plunge 3%

It comes after Nintendo reported an operating profit of about 168.7 billion yen for the October-December quarter. That was up more than 6 percent from a year earlier, but still below analysts’ average estimate of Y175bn.

In the nine months from April to December 2019, Nintendo sold 12.56 million switch consoles of its flagship game console. Meanwhile, the litth version of Switch Lite has sold 5.19 million units worldwide since its launch in the U.S., Japan and Europe on September 20, 2019.

Switch has been an important source of revenue for Nintendo. The console helped turn things around after the previous flagship Wii U suffered a slump in demand.

Daniel Ahmad, a senior analyst at Niko Partners, said on Twitter on Thursday that Nintendo’s earnings show edified that the company “is now completely dependent on Switch” and needs to focus on how to expand its console platform in 2021 and beyond.

Amir Anvarzadeh, market strategist at Asymmetric Advisors, is more pessimistic: “We think that while Nintendo’s earnings trend is good as the growth expectations rise significantly next year, we will see the share price continue to revise over the next 18 months.” “

Mr Anvarzadeh said the growing competition from Google’s Stadia, Apple’s Arcade and Sony and Microsoft’s upcoming next-generation consoles would pose “serious challenges” for Nintendo.

“We remain firmly in short positions because we expect Nintendo’s share price to fall below last year’s low of 28,000 yen over the next 12 months,” Anvarzadeh said in a note. “