- Japanese video game maker Nintendo on Thursday reported a multi-fold increase in quarterly profit on the back of strong demand for its flagship Switch console as well as the runaway success of social simulation game "Animal Crossing: New Horizons."
- Analysts appear divided on the company's outlook.
Shares of Japanese video game maker Nintendo gained 2.58% on Friday.
The company reported Thursday a multi-fold increase in quarterly profit on the back of strong demand for its flagship Switch console. The runaway success of its social simulation game "Animal Crossing: New Horizons" also helped boost sales.
Nintendo's operating profit for the three months ended June 30 came in at 144.737 billion yen (approx. $1.37 billion). It was much higher than an average estimate of 71 billion yen, according to a Refinitiv SmartEstimate quoted by Reuters.
Meanwhile, "New Horizons," the latest iteration of the Animal Crossing, has already sold 22.4 million units. It jumped to second position among the top selling Switch games, as of June 30, despite the game only launching in March this year.
Nintendo's Switch enjoyed strong sales during the coronavirus lockdown globally. The hybrid console, launched in March 2017, allows gamers to play either on-the-go, or connected to an external screen. Sales for the device has been strong as the wider video game industry saw a spike in demand during the initial wave of lockdowns globally to curb the spread of the coronavirus pandemic.
Analysts, however, appear divided on the outlook for the firm.
Atul Goyal, a managing director at Jefferies, has a "hold" rating on Nintendo's stock. He told CNBC's "Street Signs" on Thursday, before Nintendo's earnings release, that he expects sales of Switch to peak next year.
"I ran with (Nintendo) as in buy, highest conviction buy alongside Sony for the last five years," the analyst said. That changed recently as Nintendo is "not doing enough" outside its core console gaming sector, he said.
"Console gaming is great for (Nintendo) right now, but you're heading to a peak next year," Goyal said.
However, Nomura analyst Junko Yamamura has a "buy" rating on Nintendo's stock.
"We revise up out forecasts based on Apr-Jun results and current conditions. This is mainly because progress with the lengthening of the hardware and software lift cycles has exceeded our expectations," Yamamura wrote in a note dated Friday.