Shares in Nintendo (NTDOY) may suffer in New York today after the seller of hit smartphone game Pokémon Go cut its full-year sales and profit guidance due to a stronger-than-expected yen and a weaker sales outlook.
Nintendo shares have advanced 47% so far this year. The stock is traded on the Tokyo Stock Exchange 1st Section, while its OTC shares are traded in New York and closed Tuesday up 1.7% at $29.58.
The Kyoto, Japan-based games developer cut its outlook for the year ending March 2017 in its second-quarter earnings report, which was released after the markets closed in Japan on Wednesday. The company cut its full-year revenue guidance to ¥470 billion ($3.7 billion) from ¥500 billion and its forecast for recurring profit to ¥10 billion from ¥45 billion.
The company attributed the downgrades to a greater-than-expected appreciation in the yen and a revision in its sales outlook. Overseas sales accounted for 71% of the firm's overall sales in the quarter ended Sept. 30.
The company revised its assumptions for the yen to ¥100 from ¥110 to the dollar and to ¥115 from ¥125 to the euro. Since the beginning of Nintendo's fiscal year in April, the yen has appreciated more than 7% against the dollar and more than 11% against the euro.
As for the bottom line, Nintendo lifted its net profit outlook to ¥50 billion from ¥35 billion, as it booked a one-time gain of ¥62.7 billion on a partial sale of a stake in a company that runs major league baseball team the Seattle Mariners. The operating company is run by subsidiary Nintendo of America.
For the second quarter, Nintendo booked a recurring profit of ¥7.8 billion on revenue of ¥74.8 billion. Revenue plunged 34% year-on-year and missed the ¥84.9 billion called for by a consensus of 18 analysts compiled by FactSet.
The company attributed the sales decline partly to the Wii U, which saw a 53% drop in hardware sales volume and a 33% slide in software sales volume. This more than offset growth enjoyed by the 2DS and 3DS, which had enjoyed indirect boosts from the release of the hit game Pokémon Go.
As for Pokémon Go, Nintendo booked ¥12 billion in earnings from the smartphone game, which it doesn't wholly own and which was launched for sale in July. The company later said the game would not have much impact on full-year earnings as it played only a limited role in the product.
The smartphone game, which uses augmented reality technology, had been downloaded by a cumulative 500 million times as of early September, according to Niantic, the main developer of the product alongside Nintendo affiliate Pokémon Co. Niantic is a spinoff of Alphabet Inc. (GOOGL) - Get Report .
Meanwhile, Pokémon Co. will receive a fee for allowing Niantic to use the rights to the characters featured in the game. Nintendo owns 32% of Pokémon Co.'s voting rights.
Last week, Nintendo released a teaser video of its new game console, Nintendo Switch, a device which can be enjoyed both on large screens home and on the go. The game, still under development, is scheduled for release in March 2017.
The company is also set to release a new Pocket Monster-related title for its 3DS console in November and a Super Mario title for the 3DS in December. Furthermore, the company expects to release Super Mario Run, the newest version of its household game, through the App Store in more than 100 countries in December.
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