Will Nintendo Shares Keep Up With The Momentum?

Will Nintendo Shares Keep Up With the Momentum?

In recent times, Nintendo shares went up to the highest levels since 2008, right after they reported record results yet for Nintendo Switch. Yet, in 2020, this will be much harder to achieve.

Nintendo Shares Climb to Highest Rates Since 2008

The Japanese video game giant carried on with building momentum while the Covid-19 craze is ongoing, and their shares are following suit – they got to the highest levels since 2008 on 19 June. Lockdowns got people sitting at home, this made the gaming sector one of the most resilient branches of 2020. Lots of industries took a hard hit thanks to the pandemic.

Nintendo reported a spectacular series of financial reports in May spanning the 12 months to the ending of March 2020. It achieved its top year since the Nintendo Switch (the portable and TV-hybrid console) was released 3 years ago.

FY2019 outcomeFY2020 outcomeShift
Net Sales (yen, billions)1,200.501,308.509%
Operating yield (yen, billions)249.7352.341%
Net yield (yen, billions)194258.633%
Annual yield (yen, billions)810109035%

Top Year Yet for Nintendo Switch

The year was strengthened by introducing the Nintendo Switch Lite, a less costly, portable console that was put out just in September, as well as many launches of record-breaking titles.

While sales of these consoles fell year-on-year, they still moved 14.8 million of them. The selling of 6.2 million Switch Lite consoles more than accounted for the decline. This led to a 24% YoY total console sales leap to more than 21 million units, improving the 17 million it shipped the previous year.

High Demand for New Blockbuster Games

It’s been a very good year for software sales, fueled by new launches and its hit games’ continuing popularity. With almost 17.4 million copies bought out, Pokémon Sword and Pokémon Shield were the top-selling of the year for novel releases. Yet, it was Animal Crossing: New Horizons that got caught in a media frenzy.

The game, which acts out peaceful island life and is encouraging online socialization with friends, has been a huge win, as its release in March came at the same time as lockdowns were enforced in Europe and other places. After only 3 months, it has sold 11.8 million units, rendering it the record launch for a Nintendo Switch game.

Along with high demand for existing games such as Mario Kart 8 Deluxe and Super Smash Bros Ultimate. These new releases meant total game sales jumped to 168.7 million units from 118.5 million the previous year.

Moreover, many physical shops closed, many players have bought their games online than straight via their console, which gives the firm substantially better profits than physical copies.

Here is a table stating 2020’s best-selling games, showing the appeal of old and new releases alike:

Top selling games in 20202020 Sales (units, millions)Life-to-date sales (units, millions)
Pokemon Sword/Pokemon Shield17.3717.37
Animal Crossing: New Horizons11.7711.77
Mario Kart 8 Deluxe8.0824.77
Luigi’s Mansion 36.336.33
Super Mario Maker 25.485.48
Super Smash Bros Ultimate5.0318.84
The Legend of Zelda: Breath of the Wild4.6417.41
The Legend of Zelda: Link’s Awakening4.384.38
Super Mario Party3.710.1
New Super Mario Bros U Deluxe3.296.66

Can Nintendo Keep up the Pace

The Nintendo Switch is coming into its 4th year, and though the release of Switch Lite reinvigorated it, there are concerns that it might already have gotten to its peak following Nintendo warning that consoles and games sales will go down in 2020.

Nintendo said it is looking to sell 19 million consoles in 2020 and all the way to March 2021, a fall of nearly 10% from 2019. Software sales are anticipated to go down by 17% to 140 million units. The couple of them are closely connected: the people who purchase consoles then must purchase games for playing, and fewer console sales result in a smaller number of games being purchased. While consumers keep buying titles years after purchasing a console, they focus on a tight game release schedule.

This results, as shown in Nintendo’s guidance, in selling, yields, and its dividend – which is connected to yields – being lower year to year:

(yen, billions)2020 outcome2021 forecastingShift
Net revenue1,308.501,200-8.30%
Operating yield352.3300-14.90%
Net yield258.6200-22.7%
Yearly dividend (yen)1090840-22.90%

Coronavirus Makes Nintendo’s Future Unclear

A big cause for Nintendo’s restricted expectations was the Covid-10 outbreak. Yes, demand has skyrocketed for the gaming sector overall, but the pandemic did leave its mark. For instance, Nintendo’s console shipping needed to be halted in April due to shortages and supply problems for stuff like controllers. Although the production and supply problems are returning to normal and Nintendo insisted that there was little influence of the illness on its dwellings, it is conscious that the same issues can arise again if the virus continues its spread.

Nintendo acknowledged that it thought console sales were likely to continue at a large level in 2020 until the virus proved to possess a much bigger impact. The cause for its lessened projections is not attributable to a lack of demand but to supply issues.

Nintendo stated back in May that they are not in a place to make as many games as they would wish, yet that they saw signs of small improvements. They were anticipating that the pandemic’s effect was going to lessen to an extent by summer and that the scope of production in 2020 will be in line with their forecasts of the selling of units for this fiscal year. Yet the virus persisted and gotten worse, so obtaining some parts and production was hit hard, so the company acknowledged that they might not be able to keep up with the demand.

Nintendo to Count on Already Released Titles

The coronavirus may also significantly impact Nintendo’s software system, based on its effect on time. Whereas a bigger chunk of sitting at home enables more playing, it is extremely challenging for game-makers. To put it bluntly, there are major limits on what developers may do alone and outside the office instead of working with their teams at work, no matter how the tech is developed.

Nintendo was cautious, stating that the result of development-involving foreign subsidiaries and other connected firms is expected to be even harder to forecast than in the Japanese area. Due to this, they may not be in the place to continue as expected with the introduction of Nintendo devices and the launch of services. They showed their financial outlook on the basis that games will be published as expected.

Thus far, Nintendo has yet to announce this year’s biggest release aside from the announcement of Xenoblade Chronicles Definitive Edition, released in late May. Few launches were reported through the summer, so there isn’t a lot confirmed concerning what will come in the second half of 20202 and the significant trading season for the holidays. Currently, the calendar is mostly packed with changes to already-released games instead of fresh ones, but the gaming giant has some slot ideas.

They’ve planned to release more games besides those they’ve already confirmed in this fiscal year, and they’ve provided for them in the financial expectation report. But the popular gaming company was slow to dot down deadlines while their developer employees are sitting in their homes working. There’s no lack of character and franchise inspiration. They confirmed another Zelda game is coming and that a new Metroid Prime game is on its way, but they can’t say when.

Thus, the financial year’s result will essentially be decided by whether it can deliver a robust package of new products onto the marketplace. Nintendo acknowledges that it was not prepared when its Japanese employees were made to stay at home because it didn’t have a remote development environment already in place. They are still adapting to the new conditions.

Though it’s a step by step getting experience in processing what can and can’t be accomplished remotely, it admits that the effect on fresh games may go up as the scale of time spent doing the job remotely climbs up. Delays are expensive – Nintendo shares went down in 2020 when Animal Crossing was delayed.

Keeping this in mind, if there is a lack of new ones to promote, Nintendo may be made to count on more on its existing titles this year. This is not optimal because new games are some of the main causes for the gaming giant attracting new players who decide to purchase the console but to keep users amused does have a good library. It has twenty-seven games that have sold more than one million units. Nine of them were produced by outside publishers.

The popular firm is sure that some older games will climb to bigger heights soon, like the Ring Fit Adventure, which puts fitness and entertainment together. The unique controller required for it was in shortage after the game was released in 2019. The gaming giant began new marketing efforts for the game ever since the problem started slowly getting resolved.

Nintendo vs. PS5 and Xbox Series X

Between Sony and Microsoft launching their next-gen consoles, the PS 5 and the Xbox One X, in preparation for the critical Christmas period, this year may be the worst moment for Nintendo to slow down. Nintendo has perpetually been the underdog of the three big names. It draws a different audience, but improving the new consoles’ strength and efficiency could take attention away from Switch, particularly if new games don’t attract users. In the second part of 2020 and 2021, the company’s capacity to maintain customers and attract new ones will be critical.

With that in mind, Nintendo has shown to be able to keep its ground by utilizing a vastly different angle to its competitors, and the overall view is that the novel consoles should not affect much its appeal since they aim for a very different group.

The Japanese gaming name claims the move has to go a lot further. In May, the firm announced that the gadget has just got to the middle of its life cycle and that it hasn’t altered their point of view that aiming for growth is a possibility that’s not like the life cycle of other hardware. In spite of numerous rumors that it wants to release a ‘Switch Pro,’ a costlier version of the console, it does not intend to do so in the near future.

Nintendo’s Smartphone Gaming and Spread to China Fail

During 2019, Nintendo’s plan has evolved, and 2 previous company catalysts have now been put on hold and aren’t anticipated to deliver the results that were first promised.

Nintendo shifts its focus from smartphone games to IP

The first is mobile games from Nintendo. The company hyped the promise of releasing novel mobile titles based on its famed characters a few years back and claimed it would be a USD1b venture, but management has changed since.

It already has 6 smartphone games offered. While hundreds of millions of people have downloaded titles such as Super Mario Kart Tour and Super Mario Dash, Nintendo hasn’t proved it can effectively monetize them. Smartphone games and other Intellectual Property (IP) revenues got up by 11.5% in the previous financial year. Yet that’s less than the wider marketplace and still makes up for a limited amount of total revenue.

Nintendo’s view of smartphone games has now shifted dramatically following the firm’s warning that they aren’t necessarily seeking to carry on releasing lots of new apps for the smartphone marketplace. Instead of a possible money-spinner, they now see mobile unites as a marketing tool. It is a way to let fans meet characters and franchises leading them to purchase a console or gaming unit.

The amount of people playing Animal Crossing: Pocket Camp on smartphones, for example, has grown along with players of the Animal Crossing title on Switch, and it’s continuing to attract more people to the game.

Going forward, it’s all about intellectual property and searching for novel selling streams via their character catalog, such as Mario, Donkey Kong, etc. In a way, it’s very much Disney’s strategy – they license their products out to others. Nintendo has just signed an agreement with Levi Strauss to produce a collection of clothes devoted to their characters. They are collaborating on a Super Mario toy with Lego.

Some will, however, be skeptical of the mobile gaming step back. Given the handheld gaming niche of Nintendo, developing smartphone titles in the upcoming years – as well as streaming platforms such as Google Stadia – may end up being more of a danger to the Switch than the PlayStation5 or the upcoming Xbox.

Low Expectations from China Expansion

Nintendo’s extension into China was another thing that delighted investors. China is one of the world’s largest gaming markets. This assertion is even more surprising given the country put a restriction on video games in 2000-2015 due to fears that children had a negative impact on them.

The bans were partially lifted, yet the country is still ridden with stringent rules instead of Europe and the States, mainly for violent and sexual content. That’s why lots of investors liked the news from Nintendo that they will enter the China gaming arena, seeing how their games are substantially more susceptible to families than other big gaming companies.

It has partnered with the China company Tencent to obtain entry into the nation, and the Switch is currently offered with 3 games. But even with the vast market on offer, Nintendo has tempered its aspirations. According to Nintendo, China earnings have still not compensated for a big part of the previous fiscal year’s results. They’d don’t think revenue from China will have a big result on the ongoing fiscal year’s general outcome.

China is a massive gaming market and maybe the last great gap left to the big international players to explore, but it’s a very different market than the rest of the world. Most Chinese people would be extremely unfamiliar with the idea of a games console, as most have moved since the ban to computer and smartphone gaming. The markets are both somewhat different and depend more on a smartphone ‘freemium gaming’ platform than on a console game and a one-off buy.

What’s in Store for Nintendo Shares Pricing?

Nintendo shares hit a record high as investors expect Nintendo to be more robust as the pandemic persists. While Nintendo has certainly gained from the situation from renewed interest in gaming, it produced its difficulties. It may trigger more – most importantly, a delay in the release of new titles.

This financial year will not be as good as the previous one, so the substantial rise in Nintendo shares during the last 6 weeks appears unsubstantial unless investors find optimistic guidance or think the stock is a safe place to put their cash during these unstable times. Nintendo does not have any debt and is not without money. It can continue to invest in the company and to please shareholders. The dividend is not challenged, although this year it will fall because it is connected to earnings.

Rough Short-Term Outlook but Strong Long-Term Foundations

This financial year will be a lot harder for the Japanese company than the previous one. Shares will probably be put to the test after getting to record heights. The demand for Switch and the titles that come with it will put them to the test since there are some doubts about whether Nintendo can put out such a game flow.

This year, the pandemic has the ability to create complications, it’s obvious that remote jobs and game production are not going along well. The gaming firm has rendered it clear this will affect this year’s market for hardware and games, which will play into its annual reports and dividend. There will also be intensified pressure as new consoles are launched, and smartphone gaming and video sharing platforms keep gaining momentum.

Yet long-term prospects for Nintendo are solid. It’s financially equipped and willing to raise revenue, and its popular intellectual property provides enormous opportunities for going ahead. Many may believe that the previous financial year was the highest for console sales. Yet the industry hasn’t begun looking at many of its classic franchises when it comes to gaming.

The gaming pipeline’s promise remains strong, the company’s competitiveness will also increase as it moves from hardware increasingly towards higher-margin applications. The year 2020 might turn out as being poor for launches, or it might shock us all. Whatever the case is, this firm has the games it wants to get back into the game dramatically later in 2020 or potentially up until the end of March 2022.

As we said, new titles from Zelda and Metroid Prime are coming. Investors need to wait and see if there will be triggering moments for shares.

To fully function, Nintendo has to get its own employees back from remote work. Once the shutdown ends and people start returning to their ordinary routines, there’s a chance that video games will be put on the back-burner as people rush outside. Yes, giving money to luxuries such as gaming and gadgets is the first to go when a crisis rolls about. Consumers collapse into difficult times, which may mean the major players will have a problematic few years.