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Headlines
- Q1 Fiscal 2025 Results Impact: Nintendo's recent sales missed estimates, contributing to the stock's decline.
- Long-term Stock Performance: Nintendo stock has significantly underperformed compared to the S&P 500 since January 2021.
- Future Outlook and Challenges: The stock's recovery hinges on the launch of a new console and improved sales figures.
Nintendo stock (OTCMKTS:NTDOY) is down 12% in a week, while its peer, Take Two Interactive stock, has seen a 7% fall. The recent decline for Nintendo can be attributed to its recently released Q1 fiscal 2025 results, with sales missing and earnings meeting the street estimates. Nintendo reported sales of $1.65 billion and earnings of $0.5 billion, versus the consensus estimates of $1.94 billion and $0.5 billion, respectively. With the recent results and a fall in global equity markets, NTDOY stock has been under pressure.
Even over a slightly longer term, NTDOY stock has suffered a sharp decline of 85% from levels of $80 in early January 2021 to around $12 now, compared to an increase of about 40% for the S&P 500 over this period. However, the decrease in NTDOY stock has been far from consistent. Returns for the stock were -28% in 2021, -82% in 2022, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that NTDOY underperformed the S&P in 2021 and 2022.
Consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for other heavyweights in the sector including LLYVK, LLYVA, and PARAA, and even for the megacap stars GOOG(NASDAQ:GOOG), TSLA (NASDAQ:TSLA), and MSFT(NASDAQ:MSFT). In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, Nintendo might face challenges similar to those in 2021 and 2022, underperforming the S&P over the next 12 months — or it could see a recovery. Any significant uptick in Nintendo stock will largely depend on the company’s plans for the successor to the Switch console. Nintendo’s revenue of 246.6 billion yen in Q1 reflected a sharp 46.5% year-over-year fall in sales. It sold only 2.1 million units of the Switch console, down 46% year-over-year.Even the software unit sales declined 41% to 30.6 million. Its operating profit ratio of 22.1% was significantly lower than 40.2% in the prior-year quarter. Looking forward, Nintendo has guided for net sales of 1,350 billion yen in fiscal 2025, reflecting a 19.3% year-over-year decline. It expects its profits to fall 38.9% to 300 billion yen due to higher operating costs. In contrast to the challenges faced by Nintendo, communication stocks might offer a different investment outlook, given their potential for stability in turbulent times.
Nintendo had earlier announced the launch of its new console sometime in the current fiscal. If Nintendo were to launch the console before the holiday season later this year, it would have provided a significant boost to its sales in the current fiscal. But given that there is no announcement yet, it looks unlikely. Overall, Nintendo’s results weren’t great, and the stock price reflects the ongoing headwinds. A rebound in its stock will largely depend on the announcement of a new console release date and new games to go with it.
