Nintendo shares plunged deeper into bear-market territory Monday after the company's full-year operating income forecast missed Bloomberg Consensus estimates. Traders were spooked on soft Switch 2 hardware and software guidance, and the margin squeeze from surging memory-chip costs continues to weigh on earnings, first pointed out by Goldman in late Decemeber.
Nintendo forecast 16.5 million Switch 2 console sales and 60 million software copies this year, disappointing Wall Street analysts who were expecting a much stronger forecast after the console's launch nearly one year ago. The company warned that memory prices and tariffs could hit the business by about ¥100 billion ($640 million), prompting price hikes of the handheld gaming device.
Nintendo's fourth-quarter results were mixed (courtesy of Bloomberg):
Operating income 59.72 billion yen, +71% y/y, estimate 74.78 billion yen
Net income 65.19 billion yen, +57% y/y, estimate 63.44 billion yen
Net sales 407.17 billion yen, +95% y/y, estimate 415.46 billion yen
Asymmetric Advisors analyst Amir Anvarzadeh told clients, "There is cause for concern here that goes beyond hardware cost issues," adding, "As markets ponder the fate of its hardware margins, Nintendo's software sales — the key to its profits — are starting to notably sputter, reflecting weaker pull from its franchises."
Goldman analyst Maho Kamiyawarnedclients about the memory crunch hitting Nintendo's margins as far back as late December. As a result, Nintendo has raised the US price of the Switch 2 to about $500.
Nintendo's 2027 outlook also disappointed analysts, coming in well below estimates across nearly every metric (courtesy of Bloomberg):
Sees operating income 370.00 billion yen, estimate 480.29 billion yen (Bloomberg Consensus)
Source: ZeroHedge News
