(Bloomberg) -- Nintendo Co. shares rose after the company raised its outlook for profit and Switch sales for a second straight quarter following robust shipments during the holidays, the strongest sign yet that the console will be a long-term success.
The stock climbed as much as 3.8 percent in Tokyo. The stock, which gained 68 percent in 2017, is up about 20 percent this year.
The Kyoto-based company raised its operating profit outlook to 160 billion yen ($1.5 billion) from 120 billion yen for the current fiscal year through March. The company lifted its Switch hardware sales forecast for the period to 15 million, up from 14 million it set in October. The strong results triggered a volley of upgrades from Wall Street analysts, including those at CLSA and Nomura Holdings Inc.
“The company has made a comeback,” Nomura analyst Junko Yamamura wrote to clients after upgrading her outlook. “We still have the impression that the company's plan is cautious and think there is a strong probability that the market consensus for both the Switch hardware vol. and earnings will be raised to above the firm's stated targets,” Morgan Stanley MUFG Securities Co. analysts Masahiro Ono and Hiroto Segawa wrote in their report.
For Gadfly's take on Nintendo's earnings, click here
Solid results during Nintendo's most important quarter help to confirm investors' bet that the Switch, still less than a year old, will be able to fuel future profitability, following disappointing shipments of the Wii U console. Nintendo's shares have doubled to a decade-high on that optimism, reaching a market value of 6.8 trillion yen. With the holiday season over and the first wave of big homegrown titles hitting the market, attention now turns to whether Nintendo can sustain momentum by broadening the Switch's installation base beyond core fans.
Tatsumi Kimishima, Nintendo's president, unveiled several further initiatives at a news conference Thursday:
- Online services are set to start in September
- Mario Kart Tour, a smartphone version of one of Nintendo's most popular gaming series, will debut in the next fiscal year starting in April
- Nintendo is also working on a Super Mario film with Illumination Entertainment, to be co-produced by Shigeru Miyamoto and Chris Meledandri
Following are some additional figures and forecasts:
- Revenue was 483 billion yen in the quarter, compared with the prediction for 452 billion yen; full-year sales are now forecast at 1.02 trillion yen, up from 960 billion yen
- December quarter operating profit was 116.5 billion yen, exceeding the 82 billion yen average of estimates compiled by Bloomberg.
- Nintendo sold 7.2 million Switch consoles during the holiday period, bringing its lifetime total to 14.9 million and within striking distance of its goal of 16.7 million units by March
- Kimishima reiterated the goal of shipping 20 million Switch shipments next fiscal year
- 25.1 million Switch software titles were sold during the quarter
- Super Mario Odyssey, which went on sale in October, topped all games with 9.1 million units sold during the period
- Nintendo lifted its full-year Switch software sales estimate to 53 million titles, up from 50 million it set in October
- Revenue from smartphone games was 11.2 billion yen in the quarter, up from 8.8 billion yen in the previous period; some of the gain can be attributed to Animal Crossing: Pocket Camp app, which became a top-download in most countries including Japan and the U.S. after its launch in November
- The portable 3DS business shrank, as Pokemon's last titles for the handheld console went on sale; Ultra Moon and Ultra Sun, which went on sale in November, contributed to the 17.4 million 3DS software titles sold during the holiday quarter, down from 27.6 million a year ago
To contact the reporters on this story: Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net, Yuki Furukawa in Tokyo at yfurukawa13@bloomberg.net.
To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson
©2018 Bloomberg L.P.
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