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Nintendo's Stock Price Drops Over Six Percent After the Switch Announcement

| 21 Oct 2016 15:10
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Analysts are skeptical of the appeal of Nintendo's just-announced home console/portable hybrid.

In the run-up earlier this week to yesterday's Nintendo Switch announcement, Nintendo's stock price rose by 4.6 percent, representing a $1 billion bump in the company's market value. But once the Switch was announced yesterday, something happened that Nintendo probably didn't expect: its stock price fell.

When the Tokyo Stock Exchange closed today, Nintendo's stock price was down 6.5 percent, erasing the gains it had made earlier in the week. That drop also wiped out the market value gains mentioned above. Why did the announcement drop the stock price?

Dr. Serkan Toto, an analyst in Asia, told GI.biz that he's skeptical of the concept the Switch is based on. "Sorry, but is a portable/home console approach really that innovative in 2016? I am most concerned about the target group of the device: who else but die-hard Nintendo fans will buy the Switch? The Switch lacks a killer feature, and I think it will be very difficult for Nintendo to win back the casual gamers that are mostly on mobile now." Toto went on to say, "I find it very difficult to picture a scenario where a critical number of mobile, free-to-play users converts to console and buy hard- and software for several hundred dollars upfront. Different markets, very difficult to bridge."

Toto is not alone in this sentiment, either. SuperData's Joost van Dreunen said, "I have my reservations with regards to the breadth of the audience it targets. The Switch will likely be most popular among a younger audience: its functionality is uniquely geared toward pre-teens and teenagers. While the device seems much less like a toy than we're used to from Nintendo, its features like backseat multi-player and the ability to have several people play using a single piece of the controller target Nintendo's traditional audience. The reveal video makes a lot more sense to me if you swap out all the adults in it with kids."

Obviously, Nintendo would prefer to have their stock price continue to rise, but the concerns these analysts cite are definitely worth considering. It's also true that we don't know everything about the Switch yet. There could be features on the console that change everyone's perception of it. We'll just have to wait and see, as Nintendo has said there won't be any more information forthcoming until next year.

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