Nintendo Profit Is Up Over 500% on Switch Sales — But NTDOY Is Down

Nintendo profit - Nintendo Profit Is Up Over 500% on Switch Sales — But NTDOY Is Down

Source: Nintendo

Nintendo Ltd/ADR (OTCMKTS:NTDOY) released its annual earning report for 2017 and it included some staggering numbers. Strong Switch sales drove the company’s profit up more than 500% compared to the previous year. And it’s predicting more growth in 2018. In addition, Nintendo announced a new, younger, president will be taking over from the interim leader.

With the huge numbers released and indications the momentum will continue, you might expect Nintendo stock to get a shot in the arm. However, NTDOY is currently down over 3%.

Switch Sales Drive Massive Nintendo Profit Increase

Nintendo released its annual earnings report for the year ending March 31 2018, and the numbers are phenomenal. Especially when you consider the dark place the company was in just a few years back.

For the year, Nintendo generated $9.66 billion in revenue, an increase of 116% compared to 2016. And while that’s an impressive number, earnings are even more so: $1.62 billion on the year, a whopping 505% increase.

Driving that Nintendo profit were Switch sales. The company reported it sold over 15 million of the portable consoles during the year covered, bringing lifetime sales to over 17.79 million units.  Though it was actually on sale for only a month prior to the start of the fiscal year.

To put that in perspective, its previous generation Wii U console sold 13.56 million units during its entire five-year run. Sony Corp (ADR) (NYSE:SNE) is the leader in this generation of game consoles and its Playstation 4 recently hit 76 million units — but it’s been on sale for four and half years. Those strong Switch sales are the reason why Nintendo stock is up nearly 65% on the year and over 300% since the dark days of the struggling Wii U.

A New President and Momentum

The company didn’t just kill it in 2017, it has momentum.

Nintendo is forecasting that it will sell an additional 20 million Switch consoles over the next year. It also has the red hot Nintendo Labo construction sets that are expected to drive additional revenue while helping to keep Switch sales humming. As a result, Nintendo profit for 2018 is predicted to see growth of 26% for 2018.

That’s not as impressive as the 505% growth the company chalked up from 2017 — and that may have something to do with the Nintendo stock dip after the earnings report. But the company is starting 2018 in much stronger place, so triple digit growth isn’t in the cards.

In addition to the impressive Nintendo profit, massive Switch sales and guidance for 2018, the company also announced a new president.

Current president and CEO Tatsumi Kimishima is stepping down, with Shuntaro Furukawa taking his place. The current president was an interim leader, taking the place of the company’s long-term leader Satoru Itawa who died in 2015. Furukawa is 46 and has served on the Nintendo board of directors. He’s seen as a solid choice whose youth will allow consistency in leadership as the company moves out of recovery mode and moves forward.

Bottom Line for Nintendo Stock

Despite today’s dip, Nintendo stock isn’t exactly a bargain at the moment — although it still has plenty of room for upside compared to its 2007 heights.

But based on today’s earnings announcements, Nintendo profit predictions for this coming year, and the strong product lineup from the company, don’t expect it to be a cheap buy any time soon.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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