TOKYO, Jan 30 (Reuters) - Shares in Nintendo Co Ltd 7974.OS sank 12 percent after the Wii video game maker cut its earnings and game console sales forecasts, raising doubt over growth at a company that had previously defied the global financial crisis.
But some analysts said the latest forecasts from Nintendo, the creator of game characters such as Mario and Donkey Kong, were excessively conservative and the sliding share price presented a buying opportunity.
“Nintendo shares have enjoyed a certain premium as people thought the company would do well even in economic conditions like this,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
“But now, a question mark is hanging over that assumption.”
The shares fell by their daily maximum move of 4,000 yen to 28,300 yen on Friday after the maker of the Wii game console and DS handheld gear cut on Thursday its annual operating profit forecast by 16 percent to 530 billion yen ($5.9 billion). [ID:nT139304]
Nintendo had been seen as escaping the worst of the recession spreading around the world, on the view that people seeking to cut entertainment spending would stay home and play games.
But, like other Japanese manufacturers, it has been hit by a soaring yen that cuts profits on products they sell overseas. The yen has been hitting 13-year highs against the dollar.
A deepening recession in Japan is also starting to bite. The company blamed slower demand as the country slides into a downturn when it cut its sales target by 1 million Wii consoles to 26.5 million for the year to March 31.
Nintendo’s strategy to broaden the gaming population by offering innovative but easy-to-play games has been a roaring success, with the Wii far outselling Sony Corp’s (6758.T) PlayStation 3 and Microsoft Corp’s (MSFT.O) Xbox 360.
Nintendo’s operating profit is forecast to be 28.67 billion yen in January-March, Reuters calculations showed, based on its results for the nine months through December and full-year forecast.
That would be two-thirds smaller than the previous year, a sharp swing from a 21 percent rise in profits for the October-December quarter.
“Although economic conditions are bad, we think the company’s (annual) forecasts are too cautious,” Nomura Securities said in a note to clients. “We think Nintendo is under-appreciated as one of Japan’s top-earning manufacturers.”
Even the newly revised operating profit target would be a record figure, and Nintendo raised its annual sales forecast for its DS handheld console by a million units to 31.5 million even as it cut its sales projection for the Wii.
“We believe the stock will almost certainly react negatively in the near-term. However, we would see a drop in price as a chance to buy on weakness,” Goldman Sachs said in a research report. ($1=90.02 Yen)