Nintendo Slashes Earnings Forecast While Betting Heavily on 3DS

Posted Sep 29th 2010 2:00PM by Gary Sattler
Filed under: Products and Services, Nintendo (NTDOY)

An interesting situation is taking form in the world of video game maker, Nintendo (NTDOY). The company has cut its earnings forecast by more than 50% and is speaking in terms that signal wishful thinking more than corporate direction. As of this writing, Nintendo shares have lost over 8.5% on the day.

What bothers me here is not the market's reaction to the company's guidance, as much as the appearance that Nintendo is suffering from an uncharacteristic lack of precise forward momentum.

It is obvious that Nintendo is betting the house on its coming 3DS game machine. This, while it is unable to roll out the system in time to take advantage of this year's holiday buying rush. To me, this smacks of a company unable to direct its own ebb and flow. While it is true that Nintendo had clearly indicated its 3DS roll out would be poorly timed, in my view there's still no viable excuse for it.

For investors, this situation presents a couple possible scenarios. On the one hand, this could be a strong signal to abandon the company in the expectation that the floundering shall continue. To those who currently hold Nintendo shares, I recommend some deep and timely research into the company's forward prospects. On the other hand, this downward blip in the company's trend line could present a significant buying opportunity, if in fact Nintendo is showing strong prospects down the road. It should be noted however, that reaction by the gaming community to the Nintendo 3DS system has to date remained flat.

Tags: 3d gaming, 3DS, IntheNews, ntdoy

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Reader Comments (Page 1 of 1)

9-29-2010 @ 3:46PM

Warren said...

Not sure where you get that the reaction from teh gaming community has been flat. There has been almost universal praise of the system and it won numerous best of E3 awards. The gaming community is cautiously optimistic at worst.