TOKYO The popularity of Nintendo’s Wii videogame console and DS portable game machine has propelled the Japanese company’s shares to records in recent years. But it could be Game Over for such big returns in the future.
Nintendo, which was written off as a has-been a few years ago, has had a phenomenal run, overshadowing Sony’s PlayStation with two successful devices that have taken the world by storm.
While Tokyo’s benchmark Nikkei Stock Average of 225 companies has fallen nearly 25 per cent in the past two years, Nintendo’s stock price has tripled. When the company reports earnings April 24 for the year ended March 31, the results are expected to show similarly strong growth in profit and revenue.
Nintendo, with 3,300 employees and annual revenue of about $16 billion, has become Japan’s third-largest company by market capitalization, vaulting past some big names, such as mobile-phone operator NTT DoCoMo, auto maker Honda Motor and electronics conglomerate Matsushita Electric Industrial.
Most analysts are still bullish about Nintendo, with ”outperform” or ”buy” investment ratings. But some believe the days of such heady growth are coming to an end, particularly with more signs of a recession looming in the U.S., its biggest market.
A stronger yen also diminishes the value of Nintendo’s overseas profits when converted into its home currency.
”They’re at the top of their game at the moment, but it’s not going to be easy to keep performing at levels that exceed people’s expectations,” says Hiroshi Kamide, an analyst for KBC Securities. Last month, he downgraded the company to ”hold” from ”buy” and cut his 12-month price target to 57,500 yen ($570.05) from 82,500 yen.
Although Nintendo has held up better than most Japanese stocks in the recent downturn, its share price has fallen 16 per cent in 2008, and the stock has been fluctuating between 50,000 yen and 70,000 yen since last autumn. Monday, the shares rose 0.7 percent to 55,900 yen.
Analysts say they believe Nintendo’s business will continue to be strong. Wii is still outselling Sony’s PlayStation3 and Microsoft’s Xbox360, and retailers are having trouble keeping the consoles on store shelves. Nintendo has forecast sales of 18.5 million of the consoles in the just-ended fiscal year, compared with Sony’s expectations for 9.5 million in PS3 sales.
Analysts estimate Nintendo will sell an additional 26 million consoles in the current fiscal year as it increases production.
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