What's going on?
Nintendo’s shares fell 9% on Friday after analysts said the company was not-so-Super-Mario and worth less than previously estimated (tweet this) – and after disappointing results from its video game chipmaker, Nvidia.
What does this mean?
Analysts at Japanese investment bank Daiwa Securities lowered their forecast for Nintendo’s profit as they believe the company’s latest console – the Switch – won’t be in as many Christmas stockings as predicted. Bah humbug!
Misery loves company: on Friday, Nvidia’s stock fell 19% after reporting lower-than-expected sales in its previous quarter – and the chipmaker predicted lower sales to come than analysts were hoping for. Nvidia makes microchips that go in Nintendo’s Switch, so some investors appeared to blame lower demand at Nintendo – at least in part – for Nvidia’s flailing outlook. The other element chipping away at Nvidia is the cryptocurrency boom… going bust.
Why should I care?
For markets: Investors aren’t playing games.
When analysts value a company’s shares, they forecast how much profit it’s likely to make in the future – and use those forecasts to ascribe a value to the company today. Analysts actually increased their forecast for this year’s annual profit – only by 1% – but that was offset by next year’s estimate, lowered by around 2%. Although forecasts were less chipper, analysts still recommended buying the stock – but investors, perhaps seeing weaker sales forecasts from the likes of Amazon and Alibaba, didn’t seem willing to keep the stock faith and sold off Nintendo’s shares anyway.
The bigger picture: A rotten Apple.
Last week, several chipmakers said they’re expecting lower demand in the future – with a single customer largely to blame: Apple. The UK’s Dialog Semiconductor was hit by Apple’s lowered sales prediction. And in Asia, screen-maker Japan Display and Face ID tech supplier Lumentum both said similar things while cutting their sales projections, but without calling out the iPhone maker by name.