Nintendo (NTDOY) lowers Switch guidance, beats on earnings

Nintendo's latest earnings release is out and there is a lot of information to dig through, including lower Switch sales guidance.

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Nintendo just released their earnings results for the third quarter of their fiscal 2019. The company lowered their Switch console unit sales guidance for the full year to 17 million from the previous forecast of 20 million. The news wasn't all bad for the beloved video game powerhouse, as they reported better than expected earnings results. Operating profit for the quarter came in at 158.6 billion yen ($1.46 billion) versus consensus analyst expectations of 149 billion yen. Nintendo was able to grow operating profit by 36% from the year ago quarter.

Nintendo Switch welcomed two more 10 million unit sellers into the club during the quarter. Super Smash Bros. Ultimate sold a staggering 12 million units in the three weeks it was for sale in 2018 and Let's Go Pikachu! and Eevee hit 10 million units sold during the quarter. Super Mario Party sold 5.3 million units during the quarter. It was on the back of these strong sales numbers that Nintendo also upped its full year software unit sales guidance to 110 million from the previous 100 million forecast. 

Nintendo now has five titles with over 10 million software units sold on Nintendo Switch.
Nintendo now has five titles with over 10 million software units sold on Nintendo Switch.

The company also announced the delay of Mario Kart Tour, the mobile game slated to release before the end of the fiscal year. The smart device revenue segment is still puttering along with the release of Dragalia Lost helping a little, but Nintendo has yet to hit a mobile title out of the park. 

The company seems to be doing well financially, and the lowered Switch guidance removes one of the biggest gripes for analysts. They should be able to easily reach their new lowered goal, having sold over 14 million Switch consoles during this fiscal year. At the end of 2018, the install base of Nintendo Switch sat at 32 million units worldwide. The company's digital business is currently growing at 95% year over year, improving their margins. Gross margin for Nintendo sits at 41% as the company has some tailwinds from a larger software sales mix. 

While the company will be unable to meet their lofty original 20 million Switch unit sales projection for fiscal 2019, there are a lot of positive bits of news in this earnings report. Nintendo shares should regain some momentum if investors are able to look past the lowered Switch guidance and can focus on the earnings growth story. Nintendo shares in Germany (NTO) are currently trading down 1.68%, but we will see heavier trading in the U.S. tomorrow morning when NTDOY opens.


Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Nintendo via NTDOY shares

CEO

Asif Khan is the CEO and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

From The Chatty
  • reply
    January 31, 2019 1:15 AM

    Asif Khan posted a new article, Nintendo (NTDOY) lowers Switch guidance, beats on earnings

    • reply
      January 31, 2019 2:22 AM

      Other things of note:

      - The best selling Smash game so far, Smash Bros Brawl for Wii, sold about 13.29M units as of September 2018. Smash Bros Ultimate sold 12.8M units in under two months.

      Jaysis.

      - Donkey Kong Country Tropical Freeze sold 2M copies in six months, outselling its lifetime total on Wii U. There aren't many games left to port from Wii U, if any, but don't expect any discounts if they do happen. The best we can hope for are more full-featured ports (Mario Kart 8 DX) rather than ones that add basically nothing (Bayonetta 1+2).

      - The Switch crossed 30M in sales in about 20 months while it took the Xbox One four years.

      - The Switch will be crossing lifetime sales of the N64 any week now.

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        January 31, 2019 2:27 AM

        Someone on Twitter noted that Ultimate had a bigger launch month than God Of War, Spider-Man, and Pokemon Let's Go combined.

        The fuck dude

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          January 31, 2019 9:27 AM

          They have to start producing more Smash games with or without Sakurai, right? I know it's his baby, but releasing just one of these per console seems like a mistake. Especially so if the Switch has a ten-year lifespan.

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            January 31, 2019 9:30 AM

            That or get serious about making this into a game-as-service type product, which would be ideal but also outside Nintendo's core competency.

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            January 31, 2019 9:35 AM

            I think they should do a Smash Bros. animated series.

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              January 31, 2019 9:37 AM

              Huge untapped market. Waluigi can be hidden in the background once per episode. First person to spot the Waluigi gets an Amiibo.

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            January 31, 2019 10:01 AM

            What else can they add at this point? The game is loaded as is. Aside from character DLC maybe another SP mode?

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              January 31, 2019 10:03 AM

              Remove all Fire Emblem characters.

              Unfuck the Arena system.

              How about a co-op mode?

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                January 31, 2019 5:05 PM

                Make the game all Fire Emblem characters, rename Smash to Epic Sword Battles 5000

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            January 31, 2019 10:09 AM

            Mario Kart 7 sold one million units in a year seven years after it had been released. other companies would kill for evergreen sales like that but its something Nintendo regularly does with their key series.

            They do the “games as service” thing with games like Splatoon and ARMS having regular content updates, and Smash 4 had the most aggressive DLC of the last ten years (much more expensive altogether than what has been proposed for Ultimate so far), but like other Nintendo games its definitely something they plan to sell for a very long time. It’ll be a mix of that, DLC, and regular content patches/updates.

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        January 31, 2019 5:44 AM

        SSBU's number is *one* month. These are reports through Dec 31 only.

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        January 31, 2019 5:56 AM

        Man, Pikmin 3 (and 4... I thought that was done forever ago) should be ported, it's the best Pikmin game so far. Obviously everyone wants a Mario Maker but it wouldn't be the same game even if they did a 1:1 port.

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        January 31, 2019 5:59 AM

        The only game that needs to be ported from Wii U is Mario Maker.

        • Zek
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          January 31, 2019 6:01 AM

          I'm hoping they have something bigger planned for that than a port.

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          January 31, 2019 6:05 AM

          False. Give me back my wind waker hd.

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            January 31, 2019 9:09 AM

            Yes and 3D world as well. With those two I'd pack up my Wii U for sure.

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              January 31, 2019 9:11 AM

              Cat Mario was great

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          January 31, 2019 9:03 AM

          Pikmin 3 though. Pikmin Trilogy actually.

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          January 31, 2019 9:08 AM

          You misspelled “Super Mario 3D World.”

          • Zek
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            January 31, 2019 1:40 PM

            That reminded me, I really want to see Galaxy 1 & 2 HD. Those games are true classics and should not be stuck on the Wii.

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              January 31, 2019 4:02 PM

              Galaxy 1 is HD with normal gamepad controls on the Shield in China. Hopefully it happens on the Switch, its a matter of when Nintendo decides to do it. I don't think it'll happen until Mario Odyssey sales slow down and there is a gap in between new releases.

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          January 31, 2019 9:28 AM

          Wind Waker HD and Mario 3D World are the ones I want.

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          January 31, 2019 9:53 AM

          Mario Maker will be a full blown sequel

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          January 31, 2019 10:16 AM

          Wind Waker HD and Twilight Princess HD would be nice too pweeeeese

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            January 31, 2019 11:36 AM

            they should have come with the system or be offered for $10 each.

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        January 31, 2019 10:01 AM

        I wouldn't be surprised to see Nintendo start remaking classic games or at least giving them HD overhauls. The rumor was that Metroid Prime has been done since like December. Pikmin trilogy should be on the list, Xenoblade (and X), Super Mario Sunshine, 3D World, the Paper Mario games, Wave Race, Star Fox, F-Zero GX. Kind of surprising that they don't have a developer who exists to do exactly this for Nintendo. Just port and remake games. Maybe that's a good thing, but look at the success of RE2. Do it right.

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      January 31, 2019 6:11 AM

      There are 4 holds on the one copy at my library. I'd Redbox it but it ain't out yet.

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      January 31, 2019 9:02 AM

      I like saying NTDOY out loud

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      January 31, 2019 9:15 AM

      That was a good quarter. Huge jump YOY in earnings. Mobile is making them $$. I wish we’d hear more about their theme parks.