Everyone loves Nintendo — except investors

{"text":[[{"start":6.9,"text":"The latest Super Mario movie released a month ago might generate up to $1bn at the box office after sending the eponymous plumber and his friends into space. But even the demonstrated strength of some of the world’s best-known intellectual property has not been enough to save Nintendo’s stock price from crashing down to earth."}],[{"start":27.65,"text":"Since hitting a high last August, shares have sunk by about 45 per cent, as the global frenzy to build data centres pushes up the cost of the memory chips on which Nintendo relies to build its games consoles."}],[{"start":41.7,"text":"The chip price increases have led investors to think again about Nintendo’s profit margins and its ability to sell quite as many of its Switch 2 devices as it hoped after its launch last June. "}],[{"start":53.95,"text":"Crucially, the Japanese company is likely to consider once more if there are enough new games in development to encourage sales of a system that could soon get more expensive if Nintendo passes on those costs to consumers."}],[{"start":65.9,"text":"As one investor put it, the problem was “how to know when to catch a falling knife”."}],[{"start":null,"text":"

"}],[{"start":71.15,"text":"“Nintendo is a victim of its own success . . . it would probably not have the same issues without the memory problems, but investors’ expectations were sky high since the beginning,” said Serkan Toto, head of the games consultancy Kantan Games in Tokyo. “Now, they are spooked.”"}],[{"start":86.25,"text":"Nintendo is not the only gaming company feeling the pain from higher memory chip prices. "}],[{"start":91.45,"text":"Sony’s share price has shed more than 30 per cent since November. Its PS5 gaming console relies on even more expensive hardware than Nintendo, which means the rising costs of components have cut profits and made future generations of the console harder to bring to market, say analysts and people familiar with the matter."}],[{"start":null,"text":""}],[{"start":111,"text":"“The huge memory price increases mean consoles are going to take a hit, be it Switch, PlayStation or Xbox,” said Robin Zhu at Bernstein. “It’s going to take a while before memory supply catches up, which leaves a headwind the console makers need to find a way to offset.”"}],[{"start":129,"text":"Sony and Nintendo both report full annual results on Friday but it is the home of Mario, Zelda and Donkey Kong that is arguably more exposed to the pain of memory chips since it appeals to a younger, more price-sensitive fan base."}],[{"start":144.15,"text":"As it is a newer device, Nintendo needs the Switch 2 to win more users as quickly as possible so that it can sell its games. "}],[{"start":152.75,"text":"The original Switch, a revolutionary hybrid console that is both portable and plugs in at home, has sold 155mn units and 1.5bn games — a ratio of 9.7 games per console sold since its launch. That compares with closer to 2.2 for its nascent successor. "}],[{"start":173.05,"text":"That said, sales of the Switch 2 have impressed. By December, 17.4mn units had been sold, compared with the original device’s sales of 17.8mn units in its first 13 months. Taking into account when the Switch 2 was launched, sales have been 77 per cent faster, according to analysis by Jefferies."}],[{"start":194.4,"text":"The console has also been boosted by some surprise hits, such as the release of Pokémon Pokopia, which had 2.2mn sales in its first four days, and more exclusive titles could further increase game sales."}],[{"start":207.65,"text":"Undermining some of that optimism is an assumption by analysts that Nintendo will be forced to increase the price of the Switch 2 in the second half of this year. Zhu said it was possible that the device’s US price tag would jump by $50 to $500."}],[{"start":null,"text":""}],[{"start":223.6,"text":"Investors will be watching three factors closely. First is the trajectory of memory chip supply and how long it takes manufacturers, such as SK Hynix and Kioxia, to sufficiently increase output to cool prices. Some analysts think this will not happen until 2028. "}],[{"start":240.85,"text":"The second is whether Nintendo is willing to cut forecasts for the next financial year enough to make investors believe the worst impact has been priced in."}],[{"start":249.85,"text":"The final factor is the so-called Nintendo Direct, a live showcase in June of upcoming games, where a blockbuster could be announced. Some analysts are betting that a new Zelda title — the type of game that will entice more serious gamers to buy a Switch 2 — could be close."}],[{"start":266.65,"text":"There was also a chance, thought Atul Goyal at Jefferies, that Nintendo might release a new Mario game."}],[{"start":272.79999999999995,"text":"“It is just after the 40th anniversary of Mario. It’s the second year of the Switch and a year when they launch a new Mario movie. Next year is the Zelda anniversary and movie. So should we expect a Mario game this year? I think the answer is obviously yes,” said Goyal."}],[{"start":289.24999999999994,"text":"However, as Toto of Kantan Games said of a company that was very hard to predict: “You just never know with Nintendo — they could do anything, or nothing.”"}],[{"start":298.54999999999995,"text":"Nintendo did not respond to a request for comment."}],[{"start":309.15,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777800264_5861.mp3"}