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Switch is a juggernaut, but Nintendo will still feel pressure from investors

Grip joy
Image: Nintendo Life

Today Nintendo released the financial results for the second quarter, which would be easy to miss given the understandable excitement Animal Crossing: New Horizons Version 2.0 comes a day earlier. In a way, they are two-sided results, although in Nintendo’s boardroom they feel like there’s something stuck in the middle.

Below are some of our coverage that we will refer to in this article.

If you look at the numbers for areas like net sales and net profit, for a 6 months One might think Nintendo is on a cruise and investors are falling over themselves to express their joy. But billions in profits are all relative, as you can see from the declines compared to the 2020/2021 boom results.

  • Net sales – 624.2 billion yen (approximately $ 5.47 billion) – 18.9% less than last year
  • Operating profit 219.9 billion yen (approximately $ 1.93 billion) – 24.5% less than last year
  • Net profit – 171.8 billion yen (approximately $ 1.5 billion) – 19.4% less than last year

It’s the more than 18.9% declines that have made the latest investor noise undoubtedly negative. Nintendo’s share price (via Bloomberg) closed 1.66%, which is no big deal, but its current value of 49,140 yen is still near a low for the past year, a continuation of a steady decline .

Switch and Switch Lite had huge sales in 2020
Switch and Switch Lite had huge sales in 2020 (Image: Nintendo Life)

This can certainly be partly attributed to the fact that Nintendo’s strengths became a weakness in the unique circumstances of 2020 with the quite different problems of 2021. While the demand for home entertainment played into the hands of the big N in 2020, especially at Switch and Animal Crossing – Switch Lite inventory increased as inventory ran low for the standard model – the picture will be very different in 2021.

Not only are the unique domestic circumstances of the past year no longer present, but a global chip shortage and manufacturing problems also have an impact.

Not only are the unique domestic circumstances of last year gone, but a global chip shortage and manufacturing problems also have an impact. As a result, Nintendo had to cut 1.5 million units from its Switch hardware projection, with Nikkei suggesting the previous number beautiful That was a cut of 4.5 million from plans at the beginning of the year. Nintendo basically can’t make enough systems to maximize its sales and profits.

And on top of that, the elephant in the Switch room is ‘Pro’, or whatever you want to call the ‘next’ Switch. It wasn’t just fans online who got carried away this year and expressed disappointment with the OLED model, but also investors. If the Switch already had lower performance alongside Xbox One and PS4 when it was launched, it is now in a very distant position compared to Xbox Series and PS5 systems. “Triple-A” ports will become less common, or some publishers will try to convince Switch players to buy “cloud” versions, which is unlikely to work on a large scale. Until a new “generation” or a stronger system emerges, the conversation will not go away.

Nintendo's digital sales and trends have been relatively static
Nintendo’s digital sales and trends have been relatively static (Image: Nintendo)

In addition, Nintendo’s digital revenue is falling along with everything else, showing static trends at a time when Microsoft in particular is turning the market upside down with the Xbox Game Pass. The negative response to the Nintendo Switch Online Expansion Pack is contributing to the fact that Nintendo is struggling to find a successful and unique angle in this area. With the continued growth of the download gaming market, Nintendo’s offering doesn’t stand out, at least not in a positive way.

On the positive side, however, the Switch continues to be popular and extremely profitable due to the aging standard technology. As the first product to fully represent the amalgamation of home consoles and portable businesses at Nintendo, it has proven itself to be particularly good. Sales will exceed those of the Wii U and 3DS combined, with the benefit that maintaining a primary system will be much more efficient for Nintendo’s teams. The Switch captures and will soon overtake the Wii, and its best-selling title, Mario Kart 8 Deluxe, has surpassed its hugely successful Wii equivalent. In an era of gaming on so many platforms – not to mention cell phones, a bigger PC area than ever before, cloud streaming, etc. – Nintendo has been able to write a success story that has increased its place in popular culture.

LEGO block
Image: LEGO / Nintendo

With further theme parks and a big movie on the way and of course existing partnerships like the big Lego releases, Nintendo is further establishing itself outside of gaming. It’s easy to predict when, maybe 18 months from now, initiatives like this will be combined with new hardware to further improve the company.

However, excessive self-confidence should be avoided. We have to remember that Nintendo has moved from the dizzying heights of DS and Wii to the relative battles of 3DS and Wii U; two consecutive ‘winning’ generations is difficult to do.

The Switch generation was undoubtedly a success, with more to come. 24.5 million forecast sales as a Downgrade impressive due to production problems regardless of the spin; the demand remains very high. Nintendo is making billions again, which is impressive. But success is relative – 2020/21 sets standards that are simply not reproducible.

On the one hand, Nintendo is on a winning streak; On the other hand, there is plenty of room for improvement and growth. So all eyes are on the Christmas season.

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