Nintendo shares fall 10% as console prices rise. What do analysts expect?

Shares of Japanese gaming company Nintendo fell by 10% in trading on May 11 in Tokyo, reaching the lowest level since August 2024, Bloomberg noted. Subsequently, quotations slowed the pace of decline and at the close of trading in Japan fell in price by 8.4%. The market reacted to the company's financial statements released on Friday, Ma. 8, by lowering its game shipment forecasts year-over-year, which could indicate that Nintendo is unsure about its lineup of future projects, MorningStar analyst Kazunori Ito noted (quoted by Reuters).

The game maker has warned that skyrocketing memory chip prices will have a negative impact on its sales and revenue in the current financial year. The company's Switch 2 console uses chips whose prices have soared due to shortages caused by a frenzy of demand for AI and data center construction. Nintendo expects that the sharp rise in chip prices, coupled with U.S. duties, will hurt the company's business by 100 billion yen ($640 million) this year, according to Bloomberg. Against this background, Nintendo decided to raise prices for the flagship console Switch 2, released in June 2025, in Japan, the United States, Canada and Europe.

However, despite the company's stock plummeting on Ma. 11, analysts are divided over Nintendo's future, with some seeing the weak outlook as a systemic crisis and others seeing management's over-cautiousness ahead of major summer product announcements.

- "There's cause for concern here that goes beyond hardware cost issues. While the market ponders the profitability of consoles, game sales - key to Nintendo's profits - are starting to bump noticeably, reflecting waning interest in its franchises," Asymmetric Advisors analyst Amir Anvarzadeh noted in a Bloomberg commentary.

- "Investors are mainly focused on what the summer presentation season will bring to bolster their confidence. Nintendo's own lineup of exclusives remains a key driver," Bernstein strategist Robin Zhu points out (quoted by Bloomberg). The market, in particular, is waiting for the announcement of a new flagship 3D Mario game, which has not been updated since Odyssey, as well as news about Metroid Prime 4 and large-scale projects in the Zelda franchise.

Notably, despite the general pessimism of investors, long lines lined up at electronics stores across Japan for the console after the announcement of the Switch 2 price hike, Bloomberg notes. Over the weekend, many online and offline retailers nearly ran out of stock. Demand for hardware remains strong, leading experts to believe that Nintendo may be being overly cautious in its forecasts.

- "The drop in year-on-year game shipment forecasts risks signaling that Nintendo is unsure about its lineup of future projects. However, as user engagement typically accelerates in the second year of a console's cycle, we think this view is too pessimistic," MorningStar analyst Kazunori Ito points out (quoted by Reuters).

"Year two is crucial, and our view is that they [Nintendo] will release a high-quality Mario game this year. The forecast bar is lowered intentionally - Nintendo has beaten its original operating profit expectations in each of the last four fiscal years," said Jefferies analyst Atul Goyal (quoted by Reuters).

Nintendo's stock is experiencing its most prolonged decline in a decade, with its value collapsing nearly 30% since the beginning of the year and a 45% drop from its summer 2025 peaks. According to Bloomberg, investors seriously fear that even at the current price of $450-500, the Switch 2 console remains "deeply unprofitable" for the company due to abnormally expensive memory chips. The situation is exacerbated by instability in the Middle East: the conflict in the region has triggered a jump in prices for logistics and industrial raw materials, which has dealt an additional blow to the gaming giant's margins.

This article was AI-translated and verified by a human editor