Nintendo Co.’s stock experienced its most significant drop in over three months following the release of a brief teaser video showcasing its next-generation console, tentatively dubbed the Switch 2. While the video confirmed backward compatibility with existing Switch games and hinted at features like a larger screen and magnetic Joy-cons, the lack of concrete details led to a 5.9% decline in share price on Friday.
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Switch 2 Reveal Meets Expectations, Launch Date and Price Remain Key
The two-minute teaser video, released on Thursday, offered a glimpse of the new console’s design, showcasing similarities to the current Switch model. A new iteration of Mario Kart was also featured, confirming backward compatibility. However, key specifications such as price, release date, and detailed hardware improvements remained undisclosed. This lack of new information disappointed some investors, contributing to the stock dip.
Analyst Hideki Yasuda of Toyo Securities attributed the stock decline to the Switch 2 reveal aligning closely with pre-existing online leaks, lacking any significant surprises. However, he anticipates a rebound in share price once the launch date and price are announced on April 2nd. Nintendo has scheduled hands-on events for the new console on May 31st and June 1st, suggesting a potential June launch date, according to Sanford C. Bernstein analyst Robin Zhu.
New Console Expected to Reinvigorate Gaming Industry, Address Competition
The gaming industry is looking to the Switch 2 to revitalize a sector facing increasing competition from PC games and other entertainment forms. This competition has led to project cancellations and layoffs within the industry. Major game publishers are reportedly preparing to release flagship titles for the new Switch, aiming to recapture player interest.
Nintendo confirmed in November that the new console will support its online gaming services. However, the company has also cautioned that some existing games might not be compatible with the new hardware.
Success Hinges on Meeting Demand, Overcoming Past Supply Chain Issues
The success of the Switch 2 will depend heavily on Nintendo’s ability to meet consumer demand at launch. While the original Switch has sold over 146 million units, recent sales momentum has waned, leading to profit and sales forecast revisions. Previous console launches, such as Sony’s PlayStation 5 and Microsoft’s Xbox Series X and S, were hampered by chip shortages in 2020, impacting initial sales and software performance.
Bloomberg Intelligence analyst Nathan Naidu highlights the significance of the hardware segment, which contributed 40% of Nintendo’s fiscal 2024 revenue. A successful Switch successor, coupled with a strong game pipeline, could reverse the recent trend of lackluster sales growth. The ability to secure sufficient chip supply and meet anticipated demand will be crucial for the Switch 2’s long-term success. Nintendo’s April 2nd announcement will be pivotal in setting the stage for the console’s launch and determining its market reception.
