By Sam Nussey
TOKYO, May 11 (Reuters) – Nintendo (NTDOY) shares fell 7% in Tokyo on Monday after the company raised prices for the Switch 2 and as the market worries about a lack of high-profile games to build momentum.
Nintendo posted strong hardware sales for the financial year ending in March, but while the company is known for its conservative forecasts, its outlook for this year disappointed the market.
The Kyoto-based firm extended the life of the original Switch with franchise games such as “The Legend of Zelda” and, while it has achieved hits such as “Pokemon Pokopia”, it is considered to lack potential blockbusters.
“The year-over-year decline in game shipping guidance risks indicating that Nintendo lacks confidence in its portfolio,” Morningstar analyst Kazunori Ito wrote in a note.
“However, given that user engagement typically accelerates in the second year of a console’s cycle, we consider this to be overly pessimistic,” he wrote.
Nintendo also said it would raise prices for its Switch 2, with the Japanese-language Switch 2 Japan model rising from 10,000 yen ($63.73) to 59,980 yen starting May 25 and prices in markets such as the United States increasing starting September 1.
The company has an audience among casual gamers who are considered particularly sensitive to price increases, which come as electronics makers face a rise in the price of memory chips.
The second year “is crucial and our view, without consensus, is that a AAA Mario game will be released this year,” Jefferies analyst Atul Goyal wrote in a note.
“The… guidance bar is low by design: Nintendo has exceeded initial (operating profit) guidance in each of the last four fiscal years,” he wrote.
Unlike its more diversified rival Sony, Nintendo remains heavily reliant on its core gaming business, even as its characters and intellectual property prove popular in movies and theme parks.
Since the PlayStation 5 has been on the market longer, “Sony is in a much better position to pass on the higher costs of memory chips to consumers,” Amir Anvarzadeh of Ametric Advisors wrote in a note.
Sony, whose shares rose 10% in Tokyo on Monday, forecast lower sales but higher profits in its games business. The company also said it was planning a new joint venture to develop and manufacture image sensors in Japan with TSMC as it seeks to “control costs.”
“These results at least validated the thesis that Sony can protect the group’s profits by reducing PS5 shipments,” Bernstein analyst David Dai wrote in a note.
($1 = 156.9100 yen)
(Reporting by Sam Nussey; Editing by Sam Holmes)