Will Nintendo shares soar higher after Q1 profits surge?

Profits at Nintendo were five times higher than last year after the monumental success of its new Animal Crossing game which sold more than 22 million copies worldwide in 2020. But will its share price soar even higher this year?

Nintendo reported an whopping 428% increase in first quarter (Q1) profit on Thursday, with the company benefitting from a lockdown gaming boom and the huge success of its new Animal Crossing game, which has sold more than 22 million copies worldwide.

The company also had huge success for its ‘Ring Fit Adventure’ game, with people looking to exercise at home during amid government-imposed lockdowns.

‘Demand for this new proposal from Nintendo of exercising by playing an adventure game was so much higher than our forecasts that the global supply has been unable to keep up since release,’ Nintendo said in its statement.

‘The lingering effects of this product shortage in the market are still an inconvenience to a large number of consumers, but as with the Nintendo Switch family of systems, we will continue to work to ensure a sufficient amount of shipments for the holiday season.’

Nintendo is trading at 49,190 yen at the time of publication, with the stock up 15% year-to-date.

Nintendo: key figures

Operating profit in Q1 (April-June) hit 144.7 billion yen (£1.04 billion), exceeding analysts’ consensus estimate of 71 billion yen, according to data compiled by Refinitiv SmartEstimate.

Net sales came in at 358.1 billion yen, up 108% from the 172.1 billion yen Nintendo reported in the same period last year.

Nintendo managed to sell 5.7 million Switch consoles over the last three months to June, with 2.6 million units sole being of its new portable-only Switch Lite, which went on sale last September. The Kyoto-based firm maintained its sales guidance of 19 million Switch unit for the new financial year.

‘The numbers are even more impressive when you consider that throughout the entire quarter, the Switch was hard to get in all major markets,’ according to Serkan Toto, founder of game industry consultancy Kantan Games, in an interview with Reuters.

The Japanese gaming company has now sold more than 61 million Switch consoles, with its latest device on course to surpass its original Nintendo Entertainment System (NES) which was released on 15 July 1983.

Nintendo sees success with mobile gaming

The maker of gaming consoles like the Nintendo Swtich and Wii U have expanded the number of people who have access to the company’s unique IP to beyond its successful gaming platforms in recent years.

One method that has been particularly successful for the company has been its foray into the mobile gaming market, with the business building a strong following among consumers, most notably with its partnership with Niantic to create Pokémon Go which secured 60 million monthly users at its peak in June 2017.

Nintendo has successfully yielded new opportunities to develop and operate games that more people around the world can enjoy thanks to their smart devices, which in turn has helped drive profitability and cash generation at the company.

‘Nintendo will continue to flexibly transform itself by adapting to changing times while constantly valuing the spirit of originality based on the belief that “the true value of entertainment lies in its uniqueness” - and we will continue to provide products and services that surprise and delight consumers,’ Nintendo director and president Shuntaro Furukawa said in a statement.

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