Nintendo share price down, boosts net profit target on weaker yen

Nintendo Co reported strong performance on Wednesday, boosted by the fall of the yen, but the Japanese company warned for difficulties ahead as it struggles to compete with rivals.

The console maker reported net profit of ¥45.22 billion for the three months ended December, compared to a result of ¥9.6 billion stated a year earlier, according to numbers taken from nine month profits.

Sales for the third quarter stood at ¥271.5 billion, down from expectation of ¥296.1 billion. According to a survey conducted by Bloomberg, analysts had projected ¥34 billion in net profit.

Nintendo also raised its full-year projection of net profit to ¥30 billion, previously the company expected ¥20 billion in profit for the financial year ending March. The figures compare with a net loss of ¥23.2 billion a year earlier and analysts projection of ¥34.78 billion.

Nintendo, much like other export-oriented Japanese companies, benefited for the weaker yen, which contributed ¥51 billion to performance during the nine months to December.

The Japanese yen has fallen nearly 9% against the dollar during the past quarter and 4.5% against the euro, the moves were largely responsible for the higher profit guidance and results.

Nintendo sell around 70% of its production outside of Japan, including at least 40% in the US. When Nintendos overseas revenues, which are mostly in euros and dollars, get denominated back in its domestic currency the numbers get inflated due to the higher exchange rates.

However, Nintendo slashed in half its projection of full-year operating profit to ¥20 billion due to losing ground on two fronts. Nintendos consoles has been having difficulties in competing against Sonys PlayStation and Microsofts Xbox, while the company has been also losing customers to the smartphone game market, which Nintendo has repeatedly refused to take part in.

On average analysts polled by Thomson Reuters had projected Nintendo to report ¥36.6 billion in operating profit.

The console maker also reduced its sales guidance to 9 million devices for the fiscal year ending March, previously Nintendo had projected sales of 12 million. The company also adjusted its software sales forecast to 61 million units, down from 67 million.

Nintendo Co Ltd lost 0.12% on Wednesday and closed at ¥12 300 in Tokyo, marking a one-year decrease of 3.30%. The company is valued at ¥1.74 trillion.

According to the Financial Times, the 16 analysts offering 12-month price targets for Nintendo have a median target of ¥12 000, with a high estimate of ¥15 200 and a low estimate of ¥9 000. The median estimate represents a 2.44% decrease from the last close price.