Nintendo plunges 8% after Switch 2 price hike and weak sales forecast

Nintendo experienced a significant drop in its stock value on Monday, with shares falling 8.4% to close at 7,020 yen in Tokyo. This decline marks the company's lowest stock price since August 2024 and reflects a troubling year, with the stock plummeting 34% overall. The downturn follows Nintendo's announcement of a price increase for its highly anticipated Switch 2 console, attributed to soaring memory chip costs driven by the ongoing AI boom. The company now projects sales of 16.5 million units for the Switch 2 in the current fiscal year, down from 19.86 million since its launch in June of last year. This anticipated decrease in sales has raised red flags among investors. Serkan Toto, CEO of Kantan Games, commented on the situation, stating that typically, new consoles see an increase in sales, but Nintendo's prediction of a decline is alarming. He noted that the price hike is likely to dampen demand for the console. Despite a history of conservative sales forecasts, analysts like Kazunori Ito from Morningstar believe Nintendo's guidance may be overly cautious. Ito pointed out that the price increase, which raised costs by $50 in the U.S. and 10,000 yen (approximately $64) in Japan, was necessary due to sustained inflation in memory chip prices. He predicts that the Switch 2 will actually sell 19 million units this fiscal year, exceeding the company’s forecast. In addition to hardware sales, the market is closely monitoring software sales, which can significantly influence console performance. Nintendo anticipates software sales for both the original Switch and the Switch 2 to reach 165 million units for the fiscal year ending in March 2027, representing an approximate 11% decline year-on-year. Although this drop in software sales could indicate a lack of confidence in upcoming game releases, analysts believe that user engagement typically increases during the second year of a console's lifecycle. Morningstar projects software sales to be around 205 million units, surpassing Nintendo's estimate. The company has seen early success with titles for the Switch 2, including "Mario Kart World" and the viral hit "Pokémon Pokopia," which sold over 4 million units shortly after its March release. Investors are eagerly awaiting news of Nintendo's game pipeline, particularly regarding future releases featuring iconic characters like Mario and Zelda. Expectations are high for an upcoming "Nintendo Direct" presentation, where the company is likely to unveil its major software lineup for 2026.