Nintendo To Reduce Mobile Gaming Presence, Wedbush Downgrades Stock

Nintendo (NTDOY) will be reducing its involvement in mobile gaming due to disappointing results according to a June 22, Bloomberg report.

With the current fiscal year ending in March, the video game company said it would focus on mobile games already-released with no anticipation of little revenue increase from that business-line. In fiscal 2019, Nintendo was up by just 11% from the year-earlier period, earning 51 billion yen from smartphone games and other licensing.

The report follows a May 8 statement from President Shuntaro Furukawa saying, “We are not necessarily looking to continue releasing many new applications for the mobile market.”

The day after his remark, shares for Nintendo slid by 4%, while Wedbush analyst Michael Pachter downgraded his assessment of Nintendo from buy to hold with a 51,000 yen price target. He cited valuation concerns as well as a relatively unclear catalyst path.

“Over the coming months, we see the potential for downward pressure on the shares from a looming recession, ongoing Switch supply constraints, a somewhat lackluster Switch software pipeline, the upcoming console refresh from competitors Microsoft and Sony, and abandonment of its mobile effort” the analyst explained.

This follows another recent downgrade from Jefferies analyst Atul Goyal who took his buy rating to hold last month with a $58 price target (3% upside potential). 

While many mobile game makers posted record earnings during the outset of the COVID-19 restrictions, the company’s portable console known as Nintendo Switch, drew increased revenue from its video game titles. In May, Nintendo’s new game release of Animal Crossing: New Horizons sold 13.4 million units.

Nintendo’s stock is up 12% year-to-date with a Hold analyst consensus. The $58 average price target implies 3% upside potential for the shares in the coming 12 months. (See Nintendo’s stock analysis on TipRanks)

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