Why Is Nintendo Stock Falling?

Core Viewpoint - Nintendo's recent financial results indicate significant challenges, with sales and unit sales declining sharply, leading to a notable drop in stock price [1][5][6]. Financial Performance - Nintendo reported Q1 fiscal 2025 sales of $1.65 billion, missing consensus estimates of $1.94 billion, while earnings met expectations at $0.5 billion [1]. - The company's revenue of 246.6 billion yen in Q1 represented a 46.5% year-over-year decline, with only 2.1 million Switch units sold, down 46% year-over-year [5]. - Software unit sales also fell by 41% to 30.6 million, and the operating profit ratio dropped to 22.1% from 40.2% in the prior-year quarter [5]. Stock Performance - Nintendo's stock has seen a sharp decline of 85% from $80 in early January 2021 to around $12 now, contrasting with a 40% increase in the S&P 500 during the same period [2]. - The stock returns were -28% in 2021, -82% in 2022, and 25% in 2023, indicating underperformance compared to the S&P 500 [2]. Market Outlook - The uncertain macroeconomic environment, characterized by high oil prices and elevated interest rates, raises concerns about Nintendo's potential to underperform the S&P 500 over the next 12 months [4]. - Future recovery in Nintendo's stock price is contingent on the announcement of a new console, as the current Switch console is aging and consumer interest is waning [6]. Guidance and Expectations - Nintendo has guided for net sales of 1,350 billion yen in fiscal 2025, reflecting a 19.3% year-over-year decline, and expects profits to fall by 38.9% to 300 billion yen due to higher operating costs [5].