Nintendo stock (OTCMKTS: NTDOY) has seen a significant drop of 12% in just one week, while its competitor, Take Two Interactive, has also experienced a 7% decline. This recent slump can be attributed to Nintendo’s Q1 fiscal 2025 results, which fell short of expectations. Despite meeting street estimates for earnings at $0.5 billion, sales were below consensus at $1.65 billion. The combination of disappointing results and a broader decline in global equity markets has put pressure on NTDOY stock.
Looking at a longer-term perspective, Nintendo’s stock has plummeted by 85% from January 2021 levels of $80 to around $12 currently. This is in stark contrast to the S&P 500, which has seen a 40% increase over the same period. While the performance of NTDOY has been volatile, with returns of -28% in 2021, -82% in 2022, and 25% in 2023, it has consistently underperformed the S&P 500 in recent years.
Beating the S&P 500 has proven to be a challenge for many individual stocks, including other industry giants like LLYVK, LLYVA, and PARAA, as well as technology leaders such as GOOG, TSLA, and MSFT. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, offering better returns with lower risk. This outperformance is reflected in the portfolio’s performance metrics, indicating a smoother ride compared to the benchmark index.
In the current macroeconomic environment marked by high oil prices and elevated interest rates, the future performance of NTDOY remains uncertain. The potential for the stock to bounce back largely hinges on Nintendo’s plans for the successor to the Switch console. The company’s Q1 revenue of $246.6 billion yen showed a sharp decline of 46.5% year-over-year, with sales of the Switch console and software units both dropping significantly. Operating profit ratios also saw a substantial decrease, further adding to the negative sentiment surrounding the stock.
Nintendo had previously hinted at launching a new console in the current fiscal year, but as no official announcement has been made yet, the anticipated boost in sales may not materialize. With forecasts for fiscal 2025 projecting a 19.3% y-o-y decline in net sales and a 38.9% drop in profits due to higher operating costs, the road ahead for Nintendo looks challenging. The lackluster results and uncertain outlook have contributed to the ongoing struggles of NTDOY stock, making the announcement of a new console release date and accompanying games crucial for a potential stock rebound.
