Nintendo has just been hit by the biggest share price drop in two years after they were excluded from the Nikkei 255 Stock Average when it was expected they would make the cut. Their stock fell more than 8.4 percent to 10,860 yen, after they’d previous seen a massive gain of 31 percent when it was speculated they would indeed be included in the Nikkei.
The Nikkei 255 is Japan’s most prominent average of equities, and analysts predicted that this year, Nintendo would make the cut and be promoted to be included in the average. If they had, Nintendo’s stock would have been estimated to be the fourth most influential behind Fast Retailing Co., Softbank Corp and Fanuc Corp. A review of the 255 takes place once every year, and now Nintendo will have to wait to be considered for promotion again.
Nintendo currently is on the Osaka exchange in Japan, and has seen relatively positive results despite trouble with the Wii U’s first year. The 3DS and its software have performed exceptionally well, and a recent Wii U price cut and cheap 2DS handheld meant things were looking up for the holidays. The fact that they were being considered for the Nikkei shot their stock up even further. But now?
“We believe Nintendo’s shares have been overvalued due to speculative demand, on the assumption that they would be included in the Nikkei,” Takao Suzuki, an analyst at BNP Paribas SA in Tokyo (via Bloomberg). “As this expectation has come to nothing, this appears to be the right time to sell.”
And of course, there is still the ever-weak Wii U to consider in the end.
“The early signs of key first-party software inducing a major turnaround in Wii U console fundamentals are not promising, and the outlook for third-party support is grim,” Jay Defibaugh, an analyst at CLSA in Tokyo. “The value of iconic Nintendo franchises may be declining as younger generations discover gaming through mobile devices.”
Those damn mobile devices again!
Whether it’s mobile that’s killing Nintendo is debatable, as their most successful product is a mobile device, but I agree with the assertion that the value of Nintendo’s franchises may be declining.
I think there is just so much quality competition at this point between Sony, Microsoft, PC and 3rd party developers that Nintendo’s flagship franchises may not be the system sellers they used to be. Yes, new Mario, Zelda, Donkey Kong, etc. titles are usually quite good, but do they have the power they once did?
The problem is that there hasn’t really yet been a chance to find out. There have been relatively few entries in most of Nintendo’s major series since the release of the Wii U. The biggest titles have yet to be released for the system including a new Zelda game and new sequels in the Mario Kart and Smash Bros series.
But once they are out, what then? Are people still buying Nintendo consoles just for those games alone? That’s where a lack of third party support comes into play. I always said that if Nintendo found a way to combine its stellar first party line-up with the ability to play every third party title available for rival consoles, it would be in a massively powerful position. Now, Nintendo is able to play versions of current and cross-gen 3rd party games, meaning older titles like Mass Effect 3 and Arkham City, but also upcoming ones like Watch Dogs and Assassin’s Creed 4. But what happens once there stop being last-gen versions of next-gen titles? Nintendo will find themselves left behind again with minimal 3rd party support.
I think the Wii U is a fun system and Nintendo will likely release a lot of good games for it. I hope they figure out some way to retain the current 3rd party relationships they do have as companies start designing exclusively for powerful next-gen systems Xbox One and PS4. They also need to reforge relationships with companies who have abandoned them like EA and Bethesda.
Maybe next year, Nintendo.