What's going on?
On Monday, Nintendo almost doubled its profit outlook for the year compared to what it predicted three months ago – and it expects to sell 40% more of its Switch consoles this year than it had previously forecast.
What does this mean?
There has been stellar demand for the Switch, boosted in part by instalments of the flagship Mario Kart and Zelda franchises. In Japan, tens of thousands of gamers lined up for the chance to buy the console due to supply shortages! Thankfully for Nintendo, these now appear to be easing. Early console sales are important in paving the way for sales of games (which have higher margins than the consoles themselves) in years to come.
Why should I care?
For the stock: Nintendo’s shares are up about 75% this year!
Investors had high expectations for Switch sales and bought Nintendo’s shares throughout the year – but even they underestimated how popular the Switch would be. The results represent the biggest beat of revenue expectations in a decade and the biggest increase in profit in two and a half years. Nintendo’s US-listed shares jumped up 7% following the news. The stock is now at its highest level in nine years.
The bigger picture: Nintendo is fighting back to win the casual gamer.
Nintendo’s consoles have historically appealed to casual gamers who may not want to fork out for Sony’s PlayStation or Microsoft’s X-Box. But a couple of years ago, it looked like Nintendo had lost a lot of these customers to smartphone gaming companies. Nintendo has since upped its game when it comes to smartphones, with new games like Super Mario Run and Fire Emblem Heroes – and a 420% increase in revenue from this segment! The combination of a presence in smartphone gaming and the launch of the Switch, which can be used both as a home console and a handheld device, is helping Nintendo regain its popularity among casual gamers.