Shares of Nintendo Co., Ltd (TYO: 7974) decreased approximately 18% during early Monday trading on Tokyo. The company said that the smash-hit smartphone game “Pokémon Go” would have limited help to its earnings.
Nintendo will report the first quarter financial results this week, and it surprised markets on Friday with announcement that income garnered through its 32% stake in affiliate Pokemon Company would be limited. In addition, Nintendo have not plan to revise its earnings outlook for now.
The phenomenal success of Pokemon GO has boosted Nintendo shares skyrocket and even with Monday's decline, the stock price still up almost 60% form the stock before the game's July 6 launch in the United States, Australia and New Zealand.
Tsutomu Yamada, market analyst at Kabu.com Securities Co Ltd (TYO: 8703), warned investors not to be disheartened by the fall in Nintendo’s share price, informing the success of “Pokémon Go” would lead to wins for the company, such as sales of new Pokémon titles on Nintendo 3DS planned for November. “Nintendo is coming out of its recent downturn,” Tsutomu Yamada said.
Likewise, McDonald's Holdings Company Japan Ltd (TYO: 2702), whose shares got a big raise from its tie-up with “Pokémon Go,” is still expected to benefit. The company’s revenue had dragged by recent food-safety problems.
“We think that it is families that have been put off by a string of scandals at McDonald’s, and this customer group is also the target market for ‘Pokémon Go,’” said Ryozo Minagawa, an analyst at Nomura Securities.
Nintendo also expected to benefit from sales of Pokemon GO Plus which is an accessory that alerts players to nearby Pokemon so that they don't have to always be looking at their smartphones. Nintendo stated, however, that sales of the device have already been factored into its earnings outlook.
Pokémon Go launched in Japan on Friday and started in Hong Kong on Monday. The game remains the top free app in Japan on both Apple Inc.’s App Store and Google Play.