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Nintendo shares drop 8% amid Switch 2 price increase and sales concerns
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Key Points
- Shares of Nintendo closed 8.4% lower in Tokyo, to 7,020 yen, the lowest since August 2024.
- Investors are concerned about Nintendo's outlook for lower Switch 2 sales in the current fiscal year, driven by price rises for the console amid higher memory costs.
- Meanwhile, investors are waiting for announcements from Nintendo on future hit games.
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Follow your favorite stocksCREATE FREE ACCOUNTTOPSHOT - A Super Mario character is pictured at a Nintendo display ahead of the launch of the company's Switch 2 console, an electronics store in the city of Nagoya, Aichi prefecture on June 2, 2025.Richard A. Brooks | Afp | Getty ImagesNintendo shares plunged on Monday after the gaming giant warned sales of its flagship Switch 2 console would fall this fiscal year and after hiking the price of the device due to rising memory costs.
Shares of Nintendo closed 8.4% lower in Tokyo, Japan to 7,020 yen, the lowest since August 2024. The stock has fallen 34% this year.
On Friday, Nintendo announced price hikes for its Switch 2 console in markets across the world as an unprecedented surge in the price of memory chips, driven by the AI infrastructure boom, has increased the cost of producing the device.
Nintendo said that it forecasts 16.5 million unit sales of the Switch 2 in the current fiscal year, which ends in March 2027, down from 19.86 million since its launch in June last year. The predicted fall in sales of the less than one-year-old console is raising concerns among investors.
"Nintendo is predicting Switch 2 hardware sales to go down this fiscal year — instead of going up as it usually is the case with new consoles," Serkan Toto, CEO of Kantan Games, told CNBC on Monday.
"The biggest factor is of course the price hike that Nintendo thinks will lead to softer demand."
Stock Chart IconStock chart iconNintendo shares since August 2024.
'Lowballing' guidance
Nintendo has a reputation for issuing conservative guidance. Toto said the latest numbers are likely no different.
"I believe that Nintendo is, as usual, lowballing because users will get used to the new price of the console over time," Toto said.
Kazunori Ito, director at Morningstar, said in a note on Sunday that Nintendo's guidance was "overly conservative."
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"We believe the console price hike was inevitable given the prolonged inflation in memory costs. While the weak shipment guidance likely reflects undue caution on demand, the hike itself was kept modest, and we expect shipments to hold up better than the company anticipates," Ito said.
The price of the Switch 2 was raised by $50 in the U.S., and by 10,000 Japanese yen ($64) in Japan.
Ito said he expects Switch 2 sales to hit 19 million units in the current fiscal year compared to Nintendo's own forecast of 16.5 million units.
"We view Nintendo's shares as undervalued," Ito said. "The market appears overly focused on near-term headwinds and conservative guidance, while underappreciating the long-term earnings growth from over 100 million Switch users migrating to the new platform and increasing game purchases."
Game sales concerns
Another metric the market watched closely was Nintendo's software or game sales because blockbuster titles can help drive sales of hardware.
The Japanese gaming giant said it expects software sales across the original Switch and Switch 2 to total 165 million units in the fiscal year ending Mar. 2027. That would mark a roughly 11% year-on-year fall.
"The year-on-year decline in game shipment guidance risks signaling that Nintendo lacks confidence in its pipeline," Morningstar's Ito said.
"However, as user engagement typically accelerates in the second year of a console cycle, we view this as too pessimistic," he said, adding that Morningstar forecasts software sales of 205 million units, above Nintendo's own forecast.
Nintendo has had some early game successes with the Switch 2, including "Mario Kart World" and "Pokémon Pokopia," which became a surprise viral hit and sold over 4 million units in the five weeks after its release in March.
watch nowVIDEO10:5910:59Why Nintendo stopped chasing power — and changed the gameBuilt for Billions with Arjun KharpalHowever, investors are waiting to hear more on Nintendo's gaming pipeline and in particular on any upcoming games involving some of its most iconic characters like Mario and Zelda. Investors are watching closely for when the company will announce a "Nintendo Direct" event, which is where they typically lay out their upcoming major hits.
"We should get a new Nintendo Direct presentation laying out the software 2026 line-up as soon as next month," Toto said.