14 DAY TRIAL // KBC Securities Japan has recently downgraded the financial rating of games giant Nintendo, saying that it expects the sales of hardware like the Nintendo Wii and Nintendo DS to fall after the record numbers that the company has recently released. Being Japanese-based, KBC is in a unique position to monitor Nintendo's position on the games market.
KBC analysts Hiroshi Kamide wrote in a report that the price estimate for Nintendo stock at 12 months is $580, more than the current trading price of about $530. Even if an increase in the share value is to be expected, clients of KBC are advised to hold on to their already bought Nintendo shares while avoiding paying for more.
The downgrading move comes as Nintendo increased its projected sales and operating profit for the fiscal year ending March 31st in Japan, for a third time after the Wii outsold rival game players. The NPD numbers for February regarding Nintendo's biggest market, North America, showed the Wii in a good position relative to the PlayStation 3 and the Xbox.
The main fear that analysts have regarding Nintendo's evolution is that the price drops that Microsoft has announced for the Xbox, coupled with less supply problems for both the PS3 and the Xbox, will mean that gamers will no longer pick up the Wii. A falling dollar and a strengthening yen could also hurt Nintendo's profit. As the company makes most of its sales outside Japan, the fact that the dollar is less valuable that it used to be means that profits, when repatriated and turned into yens, can be lower than the company expects.
So far, just KBC has made the move of reducing Nintendo's rating. If the move is followed by other rating companies, the Japanese console maker could see a significant reduction in its overall value as share prices go down. But strong sales in March will reduce the risk of further financial downgrades for Nintendo.