Nintendo shares slump as price hikes, games shortfall spook market

Nintendo says the global chip shortage is hurting Switch sales. (Budrul Chukrut/SOPA Images/LightRocket/Getty Images via CNN)

Nintendo’s shares fell seven per cent in Tokyo on Monday after the company hiked ‌Switch 2 prices and as the market frets over a lack of high-profile games to build momentum.

Nintendo posted robust hardware sales for the financial year ended March but, while the company is known for its conservative forecasts, its outlook for this ​year underwhelmed the market.

The Kyoto-based firm extended the life of the original Switch with games from ​franchises such as “The Legend of Zelda” and, while it has scored hits such as “Pokémon ⁠Pokopia”, it is seen as lacking potential blockbusters.

“The year-on-year decline in game shipment guidance risks signaling that Nintendo ​lacks confidence in its pipeline,” Morningstar analyst Kazunori Ito wrote in a note.

“However, as user engagement typically accelerates ​in the second year of a console cycle, we view this as too pessimistic,” he wrote.

Nintendo also said it would raise prices of its Switch 2, with the Japanese language Switch 2 Japan model to go up by 10,000 yen (US$63.73) to ​59,980 yen from May 25 and prices in markets such as the U.S. to rise from September 1.

The ​company has an audience among casual gamers who are seen as particularly sensitive to price hikes, which come as electronics ‌makers ⁠grapple with a memory chip price surge.

The second year “is crucial and our non-consensus view is that it will release a Mario AAA game this year,” Jefferies analyst Atul Goyal wrote in a note.

“The... guidance bar is low by design — Nintendo has beaten initial (operating profit) guidance in each of the past four fiscal years,” he wrote.

Unlike ​more diversified peer Sony, ​Nintendo remains highly dependent ⁠on its core gaming business even as its characters and intellectual property prove popular in movies and at theme parks.

With the PlayStation 5 having spent longer on the ​market, “Sony is in a much better position to pass higher costs of memory ​chips to consumers,” ⁠Amir Anvarzadeh of Asymmetric Advisors wrote in a note.

Sony, whose shares were up 10% in Tokyo on Monday, forecast lower sales but higher profit at its gaming business. The company also said it was planning a new joint ⁠venture ​to develop and manufacture image sensors in Japan with TSMC (2330.TW), opens new tab as ​it seeks to control costs.

“These results were at least validating of the thesis that Sony can protect group profits by scaling back PS5 ​shipments,” Bernstein analyst David Dai wrote in a note.

Reporting by Sam Nussey; Editing by Sam Holmes