Nintendo shares set to rise as online subscriptions surge

Nintendo is set to see its stock rise higher after subscriptions for its Switch Online service drive up its recurring revenues, with the business blaming the recent surge on the success of its Animal Crossing: New Horizons game.

  • Nintendo shares continue to surge as interest in gaming rises amid Covid-19 restrictions
  • The Japanese gaming company sees recurring revenues increase
  • Nintendo on track to deliver strong Q2 performance on 5 November

Nintendo is set to see its stock rise higher after subscriptions for its Switch Online service skyrocketed - driving up its recurring revenues - with the business blaming the recent surge on the success of its Animal Crossing: New Horizons game.

Nintendo Switch Online, is a service that allows gamers to play against other players from around the world and access hundreds of classic gaming titles.

The service has grown rapidly in 2020 with people cnfined to their homes amid government imposed lockdowns aimed at curbing the spread of Covid-19, with Nintendo boasting more than 26 million users as of September this year, up from 15 million in January.

Nintendo is trading at JPY 59,830 per share at the time of publication, with the stock up 40% year-to-date. The maker of gaming consoles like the Wii and SNES is set to unveil its half-year results on 5 November.

Nintendo owes online subscription sales to popular gaming titles

Nintendo president Shuntaro Furukawa said the company owes the increased interest in its online service to the popularity of hit titles like Animal Crossing: New Horizons, which sold more than 22 million copies so far, along with the success of other big name franchises like Legend of Zelda: Breath of the Wild and Super Smash Bros. Ultimate.

Console gaming rivals Sony and Microsoft are set to release their next-generation systems (PS5 and Xbox Series X) in time for Christmas this year, with the pair also targeting users with their own online subscription services in an attempt to prolong the life of their current generation consoles.

Will Nintendo deliver another strong set of quarterly earnings in November?

In its first quarter of trading (April-June 2020), operating profit 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.

Investors will be hoping that Nintendo can deliver another strong performance when it reveals it half-year results on November.

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