Shares of Nintendo plummeted on Friday afternoon a day after the company reported operating profit for the October-December quarter that came in below analyst expectations.
During Friday afternoon trade, shares of the game maker plunged more than 4%.
The decline came after Nintendo announced an operating profit of about 168.7 billion yen (approx. $1.55 billion) in the October-December quarter. That was a more than 6% increase from the same period in the previous year, but it missed mean expectations of 175 billion yen (approx. $1.61 billion) from analyst estimates compiled by Refinitiv, according to Reuters.
In the nine months from April to December 2019, Nintendo sold 12.56 million of its flagship Switch gaming console. Meanwhile, the Switch Lite — a stripped-down version of Switch that's sold at a more affordable price — sold 5.19 million units globally, since launching in the U.S., Japan and Europe on Sept. 20, 2019.
Switch, marketed as a hybrid console which enables gamers to play on-the-go and at home when connected to a TV, has been an important revenue driver for Nintendo. It's helped turn the company's fortunes around after its previous flagship model, the Wii U, was met with lackluster demand.
Daniel Ahmad, senior analyst at Niko Partners, said in a tweet on Thursday that Nintendo's earnings showed the firm was "now wholly dependent on Switch" and will now "need to focus on how to expand its console platform come 2021 and beyond."
Amir Anvarzadeh, a market strategist at Asymmetric Advisors, had a more negative take: "We think we will see (Nintendo's) share price continuing to correct over the next 18 months despite its decent earnings trend as growth hurdle rates have risen dramatically going into next year."
Anvarzadeh said growing competition from the likes of Google's Stadia, Apple Arcade as well as impending next generation consoles from Sony and Microsoft are set to "provide stiff headwinds" for Nintendo.
"We retain (Nintendo) firmly in our recommended shorts as we see its share price breaking below last year's lows of Y28K within the next 12 months," Anvarzadeh said in a note.