Shares of Gree tumbled 18 percent to an eight-month low on Wednesday after the social gaming firm slashed its annual earnings forecast, citing a delay in the release of some game titles and sluggish overseas earnings.
After the market close on Tuesday, Gree cuts its operating profit forecast by 30 percent to 50 billion yen to 60 billion yen ($537 million to $645 million) from a previous estimate of 74 billion yen to 84 billion yen.
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In response, Nomura Securities downgraded its rating on Gree to 'neutral' from 'buy' and chopped its price target to 1,500 yen from 2,300 yen.
Gree was last trading 16.4 percent lower at 1,135 yen, on track for its biggest one-day percentage drop since early May.
Rival DeNA fell 3.2 percent to 2,720 yen.
Goldman Sachs said the cut to full-year operating profit guidance was "larger than expected and surprising."
"Conditions look challenging as higher costs pressure profits amid weak sales both in Japan and overseas," the brokerage said in a note to clients.
"Gree benefited from growth in card games in 2011, but monthly user numbers and ARPU (average revenue per user) were both weak in 2012. Overseas business has not performed as expected."
The company's six-month operating profit to end-December fell 23 percent from a year earlier to 30 billion yen.
Gree shares sagged nearly 50 percent in 2012, mainly due to Japan's Consumer Affairs Agency banning gambling aspects in a game, known as "complete gacha", which charged users around $3 to $4 to turn over virtual cards to claim rare cards or other online rewards.
Despite more stringent rules to limit minors from spending too much money on mobile gaming, Gree said early this month that it had overcharged 5,624 underage players nearly 50 million yen between last April and January.
Users under 15 are only allowed to spend 5,000 yen a month on the gaming platform, while those aged between 16 and 19 are only allowed to spend 10,000 yen a month.