Analyst Explains Nintendo's Tumbling Stock Price

[Logan Westbrook]

Analyst Explains Nintendo's Tumbling Stock Price

Nintendo needs to be a little bit more forthcoming with Wii U details if it wants its investors back.

Nintendo revealed the Wii U, the successor to the massively successful Wii, at E3 this week. It delighted the crowds in Los Angeles, but investors were much less impressed and Nintendo's share price dropped to its lowest point in five years [http://www.escapistmagazine.com/news/view/110810-Nintendo-Shares-Tumble-Following-Wii-U-Reveal]. Panoptic Management Consultants analyst Asif Khan believes he knows why this happened, and largely puts it down to uncertainty about the device.

"Put very simply," Khan said. "Investors hate uncertainty." He said that Nintendo had not revealed enough information about the Wii U. Investors had no idea what it could cost, when it was coming out, what the specifications would be, who was supplying the components, and even what the features would be. "Given the uncertainty," he added. "I am not surprised shares have sold off."

He also felt that the Wii U's unusual controller was proving to be a sticking point for some. Most investors had not had a chance to use it, he noted, and the demos that Nintendo showed off were rather limited. He didn't think that Nintendo had become a bad company to invest in overnight, however, and said that he was advising his clients to seize the opportunity to buy stock while it was relatively cheap.

With a year to go before the Wii-U actually comes out, it stands to reason that Nintendo is going to be a little vague about it. It's not hard to see Nintendo bouncing back when the Wii U's launch is a little closer, and it has revealed more of the console's features.

Source: Industry Gamers [http://www.industrygamers.com/news/nintendo-missed-hitting-a-home-run-at-e3-says-analyst/]


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[Kopikatsu]

I never understood claims like that. 'Nintendo's stock is the lowest it has been in five years!'

So what about five years ago? What happened then? What was Nintendo's lowest point before then? Why didn't anyone care then?

It's like, 'the economy is as bad as it was fifteen years ago!' Well, 1996 wasn't exactly the Great Depression, so what? And why weren't they going 'The economy is AWFUL! We need to fix it!' in 1996, but they are now?

 

[GeneticallyModifiedDucks]

I never understood claims like that. 'Nintendo's stock is the lowest it has been in five years!'

So what about five years ago? What happened then? What was Nintendo's lowest point before then?

Well, that was pre-Wii and just barely a year into DS, so they weren't making as much money then (I assume that's the case). So, naturally stocks were significantly lower.

 

[brunothepig]

Well, this is what I was thinking, so obviously this analyst is one of the best ones in the business.
No but really, Nintendo always have devices that raise an eyebrow or two. A handheld with TWO screens? That'll never work. Motion controls? That's just stupid. Actually, I wonder if stock dropped a bit with the announcement of the Wii as well. DS was less risky I guess. I doubt the stock will stay low.

 

[JediMB]

Investors had no idea what it could cost, when it was coming out, what the specifications would be, who was supplying the components, and even what the features would be.

I thought it common knowledge that IBM and AMD are supplying the most expensive components.

Going by the assumption that they're using the same supplier for the controller's screens as they do for the 3DS's.

 

[Gaderael]

They'll be fine. I know me and some of my friends who I have been talking to are really excited about the console. Definitely getting it next year. I get to keep using my wife's wii stuff, plus there'll actually be more mainstream titles like Arkham City on it, it'll actuallt have HD graphics, and hile the controller has the touchscreen, it still has a pretty standard layout, with the d-pad, dual analog, should buttons, and the like. It's going to be good.

 

[Lanhavoc]

I find myself indifferent to any news about Nintendo, seeing as how I don't fit into the Family/Children/Casual demographic.

Putting a display on a controller isn't a new idea, remember the Dreamcast? It was just as pointless back then. If I need to be distracted from the primary display then there must not be much to look at to begin with.

 

[Tzekelkan]

Well, this is what I was thinking, so obviously this analyst is one of the best ones in the business.
No but really, Nintendo always have devices that raise an eyebrow or two. A handheld with TWO screens? That'll never work. Motion controls? That's just stupid. Actually, I wonder if stock dropped a bit with the announcement of the Wii as well. DS was less risky I guess. I doubt the stock will stay low.

I agree, those investors have to be fucking insane. From a purely monetary perspective, Nintendo won this generation's console war. It sold a bajillion Wiis and DSes. It wasn't a fluke, everything they've done for years has been printing money. Investors don't care about hardcore vs. casual, screens vs. no screens. They care about money, so what the hell?

I've got mixed feelings about the Wii U, but I'm sure it'll be a great success, even if that success won't be within my immediate circle of friends.

 

[RvLeshrac]

Share price means absolutely nothing. The company gets no money save from their IPO, or if they decide to release new shares. Nintendo has *plenty* of cash, so here's hoping they ignore the market.

The market doesn't make games, nor do they even understand the business.

 

[ChromeAlchemist]

I think even Pachter could've guessed this one. Investors aren't sure if this'll work. It looks expensive and high risk. Only time will tell if it works.

 

[Aiddon_v1legacy]

Well, this is what I was thinking, so obviously this analyst is one of the best ones in the business.
No but really, Nintendo always have devices that raise an eyebrow or two. A handheld with TWO screens? That'll never work. Motion controls? That's just stupid. Actually, I wonder if stock dropped a bit with the announcement of the Wii as well. DS was less risky I guess. I doubt the stock will stay low.

Actually it DID go down with the Wii announcement. Heck, nearly every time Apple announces something stocks go down in price. Plus the stock market is a heavily manipulated thing. Seriously, go read some of Matt Taibbi's books about it, you'd be shocked. A sudden drop in prices doesn't mean much. If it was a drop over a LONG period of time, that'd be cause for concern.

 

[DasDestroyer]

Is it just me, or does the picture look like he's going to burst out laughing any second, and say "Just kidding, we think this controller looks weird too"?

 

[Ukomba]

Don't people remember? Sony's stock fell sharply after the release of the PS2. It was ~150 on March 3rd, 2000 and fell to ~120 by March 10th, 2000, a 20% drop. Even though it sold well.

 

[AzrealMaximillion]

Well, this is what I was thinking, so obviously this analyst is one of the best ones in the business.
No but really, Nintendo always have devices that raise an eyebrow or two. A handheld with TWO screens? That'll never work. Motion controls? That's just stupid. Actually, I wonder if stock dropped a bit with the announcement of the Wii as well. DS was less risky I guess. I doubt the stock will stay low.

I agree, those investors have to be fucking insane. From a purely monetary perspective, Nintendo won this generation's console war. It sold a bajillion Wiis and DSes. It wasn't a fluke, everything they've done for years has been printing money. Investors don't care about hardcore vs. casual, screens vs. no screens. They care about money, so what the hell?

I've got mixed feelings about the Wii U, but I'm sure it'll be a great success, even if that success won't be within my immediate circle of friends.

Nintendo has been printing money yes, but their 3rd party support has had companies losing money on both the Wii and the DS. Probably why we've seen such a horrible start and sales for the 3DS. This Wii U also seems a bit impractical. So do people have to buy 4 of the iPad controllers for multiplayer? You kow those controllers will be over $100 easy.

And calling investors insane because of Wii sales is a bit silly. Think about it, sales for the Wii and DS flatlined 2 years ago. The only games that sell on them are 1st party games. And to be completely honest Nintendo bragging about their new console competing with current gen graphics isn't good. Especially when we know that either in 2013 or 2014 Sony and MS will announce new consoles that make the Wii U look stupid. What Nintendo did was essentially enter the next gen 2 years early. That leaves 2 years of price drops coming from Sony and MS to constantly undercut the Wii U. Taking all that into account it's not hard to see why investors are selling stock. You can sit there and rant about how Wii sales are massive and how investors have no idea but when you actually go into the specifics like I mentioned, it's hard to tell if the Wii U will be just as big of a success.

On another topic, what the hell is gonna happen with Skyward Sword? Are they gonna do what they did to what was supposed to be the Wii's first True Zelda game and completely mess that up too? Are they going to add a whole bunch of crap to it to hopefully make use of all the gimmicks and try and make a flagship game out of it?

 

[UnknownGunslinger]

Gamers now it's the time to brake the piggy bank and invest in Nintendo

 

[AzrealMaximillion]

Don't people remember? Sony's stock fell sharply after the release of the PS2. It was ~150 on March 3rd, 2000 and fell to ~120 by March 10th, 2000, a 20% drop. Even though it sold well.

Difference is those stock number were based on initial sales after the first week of the PS2s release.

This drop in stocks for Nintendo is based off of a lot more:
No that much info about what the Wii U can ACTUALLY do. I mean the trailer is nice but trailers can be doctored to look better.

They're essentially announcing their next gen console 2 years before the competition. This gives MS and Sony 2 years to undercut the Wii U in prices heavily. Also Nintendo has said that the Wii U's graphical capabilities are almost on the same level as the 360 and PS3. Competing with the current gen on your next gen device isn't smart. It gives the competition time to make something much better.

3rd Party support is still a massive problem for Nintendo. 3rd Party companies just wound up losing money on the Wii and stopped making games for it. Why come back to the Wii U? They don;t even know how Nintendo will market this console...well sort of (next point explains)

Nintendo seems to think Better Graphics = Core gamers.
http://www.escapistmagazine.com/news/view/110866-Nintendo-Wii-Us-HD-Graphics-Will-Bridge-the-Casual-Core-Gap
Now any gamer knows that's asinine. Investors take that into account more than people think. Trust me. Remember the Internet Security Company CEO who got gurked by Anon? He had maxed out characters on WOW. If people like him play games, investors play games. Shiny graphics does not equal sales to core gamers. Sorry I'll play Half-Life 2 over Zelda HD any day of the week. Hell, I'm playing Thief 3 right now.

My overall point is that this is a completely different situation for Nintendo than it was for PS2 era Sony.

 

[Mackinator]

I find myself indifferent to any news about Nintendo, seeing as how I don't fit into the Family/Children/Casual demographic.

Putting a display on a controller isn't a new idea, remember the Dreamcast? It was just as pointless back then. If I need to be distracted from the primary display then there must not be much to look at to begin with.

The Dreamcast was an awesome console and every consule nowadays has followed in its footsteps with online gaming. I find it funny that you are dimissing the console wihout knowing much about it. One thing I would already argue against you is that the Wii U will be in HD which is what most people I know complained up with the wii - those "hardcore" gamers.

I dont think you could be anymore anti-nintendo. The DS was an amazing handheld too and there are reams of games out there for "Hardcore" gamers too so I don't understand why you are so indifferent to Nintendo News.

Just for the record I have a Wii but play my Xbox and Pc far more regualrily so I can see why you may be pessimistic, but all Im saying is dont shoot the Wii U down before its released.

 

[Hungry Donner]

I think the Wii U was surprisingly lackluster, but I think this stock drop is largely unimportant (although in the short term it is a convenient indicator that the Wii U didn't excite the masses).

Chances are Nintendo's stock was buoyed up with the unreasonable expectation that they'd set the internet on fire at E3, so a good portion of the drop was just a correction. I also think Nintendo's stock is likely to recover fairly quickly, which means much of the drop was an unreasonably bad reaction to the Wii U news.

The Wii U still doesn't appeal to me, but I don't think Nintendo has short term stock concerns. (Now if people aren't excited by the time its release then Nintendo will have a problem.)

 

[josh797]

thats good to know. i wondered why it was that their stock dropped after announcing such a cool new device