Nintendo posted its biggest intraday drop since February 2019 on prospects that the end of quarantines will reduce demand for games.
Nintendo fell as much as 8.8% this Friday (Asia time) after its quarterly earnings missed estimates, underscoring concerns that demand for games may have peaked as several countries emerge from the pandemic and return to work.
The gaming company posted its biggest intraday drop since February 2019, despite announcing Thursday that it plans to buy back up to 1.51% of its shares for 100 billion yen, which it then plans to cancel. The buyback reflects its cash position thanks to strong sales, the firm said.
The Kyoto-based company reported an operating income of 119.75 billion yen (US$1.1 billion) for the quarter to June, compared with the average forecast of 130.9 billion yen. However, it maintained its forecast of a 22% drop in profits to 500 billion yen this fiscal year, along with sales of 25.5 million Switch consoles.
Nintendo, whose Animal Crossing: New Horizons game was the breakout title of the Covid-19 era, is grappling with aging hardware as normalcy returns to some regions of the world and people spend less time immersed in games. The firm offered a mixed picture with sales of its Switch console falling 22% to 4.45 million units, but with an uptick in its more expensive standard edition.
Semiconductor shortages and logistics problems continued to affect the production of the device, said Nintendo, which attributed the drop in Switch Lite sales to lower inventories in Europe and the United States.
“This quarter’s games were not enough to make up for the gap left by Animal Crossing,” said Hideki Yasuda, an analyst at Ace Research Institute. “July market data shows that Switch and Switch Lite sales are falling. Nintendo will have another tough time ahead in the July-September quarter, which could be worse than the April-June period.”
The long-awaited next game in the Zelda franchise, a sequel to Breath of the Wild, won’t be out until 2022. Nintendo is now counting on the Oct. 8 launch of a new Switch model with a larger OLED screen to revitalize the four-year-old platform in time for the crucial holiday season.