Home features Nintendo stock price tumbles despite higher forecasts. Here’s why

Nintendo stock price tumbles despite higher forecasts. Here’s why

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  • Stay-at-home stocks faced increased selling pressure on positive vaccine new
  • Last week, Nintendo upgraded its guidance for Switch video game consoles
  • Nintendo share price closed 4.5% lower today after printing the lowest level in nearly three months

Shares of Nintendo Co. (T: 7954) fell 4.5% today as stay-at-home stocks took a beating amid the renowned optimism that a regulatory-approved vaccine will be available soon. 

Fundamental analysis: Higher forecast published

Last week, Nintendo announced it aims to ship 24 million of its Switch video game consoles through March 2021, an upgrade from its previous forecast of 19 million. Nintendo also boosted its operating profit outlook by 50% to 450 billion yen ($4.3 billion) thanks to certain video games such as “Animal Crossing: New Horizons” which have been attracting new gamers to the Switch console.

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However, the Japanese company warned about uncertainty as the current gaming frenzy is mainly driven by the coronavirus pandemic.

The company’s operating profit during the period between July and September rose by more than 50%, compared to the same period from last year, with the company reporting an operating profit of 291 million yen for the first half of the year. 

The consumer electronics company had been sceptical about lifting its forecasts even in spite of strong sales of the Switch console, pointing out that the boost in sales could prove short-lived as gamers have been forced to stay at home because of the pandemic.

Shuntaro Furukawa, the president of Nintendo said the company had experienced certain production issues with the Switch console but the resolution of these problems helped boost the sales and allow the company to reiterate its guidance. 

The Japanese company sold 12.5 million of Switch consoles in the first half of fiscal 2020, including 8.4 million hybrid home-portable Switch devices and 4.2 million portable-only Switch Lite consoles.

The estimates are “still conservative, but at least Nintendo reacted,” said Serkan Toto, founder of an independent consultancy focused on Japan’s game industry, Kantan Games.

Lockdown restrictions during the year and the recent resurgence in coronavirus cases may indicate that the gaming boom could continue as we approach the end of 2020.

Technical analysis: Shares plunge on vaccine breakthrough

Shares of nearly all companies focused on the gaming sector fell on Monday and Tuesday on reports that the Covid-19 vaccine could be available soon. Nintendo share price closed 4.5% lower after printing the lowest level in nearly three months.

Nintendo stock daily chart (TradingView)

Still, the buyers have managed to secure a daily close above the 200-DMA at 53900. A daily close below this level would almost certainly push the stock towards the key near-term support line at 51900 to offer new buyers a chance to get on the long side. 

Summary

Nintendo stock price fell on vaccine news, just a week after the Japanese consumer electronics company raised its forecast for Nintendo Switch consoles.