Published , by Asif Khan
Published , by Asif Khan
The Nintendo Switch train is losing steam heading into its seventh year since launch. Nintendo issued a downbeat FY 2024 forecast with the Big N expecting sales to drop 9.5% from the previous year.
Here's an excerpt from the Nintendo FY 2023 earnings release:
For hardware, by continuing to convey the appeal of Nintendo Switch, we try to not only put one system in every home, but several in every home, or even one for every person. Another objective is to continually release new offerings so more consumers keep playing Nintendo Switch even longer and we can maximize hardware sales. Looking ahead at software, in addition to The Legend of Zelda: Tears of the Kingdom in May, and Pikmin 4 in July, add-on content for Pokémon Scarlet and Pokémon Violet in the form of The Hidden Treasure of Area Zero is on the way. The first part of this add-on content, The Teal Mask, is planned to be released in the fall of 2023, and the second part, The Indigo Disk, is planned for release in the winter of 2023. Other software publishers also plan to release a wide variety of titles, and we will work to invigorate the platform by supplementing existing titles with a continuous stream of new titles and add-on content. The Super Mario Bros. Movie was released in theaters in April as part of our efforts to expand the number of people who have access to Nintendo IP. Through initiatives like this, we will work to continually grow our dedicated video game platform business, which is our core business. Our financial forecast for the next fiscal year is sales of 1,450.0 billion yen, operating profit of 450.0 billion yen, ordinary profit of 480.0 billion yen, and profit attributable to owners of parent of 340.0 billion yen. The unit sales forecasts for key products on which these calculations are based can be found on page 14 in the "4. Others" section, under the heading "(4) Consolidated sales units, number of new titles, and sales units forecast." Assumed exchange rates for the major currencies are 130 yen per U.S. dollar, and 135 yen per euro.
It certainly appears that Nintendo is planning for a leaner year of hardware and software sales. The company forecasts 15 million Switch console units will be sold in FY24 which would still be more than the 13.5 million in lifetime Wii U console unit sales. Nintendo has come a long way in the six years since the Switch launched, and it appears that the company is coasting into the next generation of hardware for the time being.
The Super Mario Bros. Movie revenue was not disclosed in this report because the movie came out in April 2023 which is the company's fiscal Q1 2024. The line item to keep an eye on next quarter will be Mobile, IP related income, etc. That is where the revenue from the Mario movie will show up, but investors will remain in the dark for another quarter. Many analysts, traders, investors, and fans want to know just what kind of partnership has been formed between Nintendo and Illumination and how it will affect the bottom line.
For now, Nintendo's forecast seems pretty light in the back half of this year. Sure, Advance Wars 1+2: Re-Boot Camp, Pikmin 4 and Tears of the Kingdom are great first party titles, but the second half of 2023's notable releases are some Pokemon DLCs and Waves 5 and 6 of the Mario Kart Booster Course Pack. This could all change with some unannounced releases, but the Switch's console cycle could ultimately be bookended by two Zelda titles.
Nintendo's cautious guidance may spook some investors, but the Switch console cycle wasn't going to last forever, and the company is positioned well with new IP-related efforts like Super Nintendo World and the Mario Movie. The Big N is known for sandbagging forecasts, but today's FY 2024 guidance appears to be an honest admission that the Switch's best days are behind it.
This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.
Full Disclosure:
At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:
Long Nintendo via NTDOY shares