Nintendo Co. share price down, posts quarterly loss, vows return to profit

Nintendo Co., the world’s largest maker of video-game machines, posted a net loss in the quarter ended March, but projected profit exceeding analysts estimates for the financial year through March 2015.

Nintendo reported a net loss of of 33.4 billion yen in the three months ended March, trailing analysts average projections for a 27.9-billion-yen loss. Sales slid to 72.6 billion yen, below expectations for 86.1 billion yen.

However, Nintendo expects to return to profit in the current fiscal year using price cuts, cheaper consoles and by releasing new titles, including Super Smash Bros. and Mario Kart 8. The new releases are expected to revive interest in Nintendos Wii U console, which has suffered under the competition of Microsofts Xbox One and Sonys PlayStation 4 consoles, as well as inexpensive smartphone games.

Despite the Wii Us lead time over its same-generation rivals, it has suffered weak sales, and Nintendo admitted it faces a tough situation. The company managed to sell only 2.72 million Wii U devices during the whole 2013 fiscal year, down from 3.45 million a year earlier. In comparison, Sony has sold over 7 million of its PlayStation 4 consoles, while Microsoft reported it has delivered more than 5 million Xbox One units since its launch in November.

Nintendo posted a 23.2-billion-yen net loss last year, but projected a net profit of 20 billion yen for the current year on a 3.2% jump in revenue to 590 billion yen. According to a Bloomberg survey, analysts expect net profit at around 16 billion yen.

The swing back to profit will be based on a rebound in consoles sales. Nintendo will aim to sell 3.6 million Wii U units and 20 million Wii U games in the current year. The company will attempt to lure players back from inexpensive smartphone games and its main rivals Microsoft and Sony by releasing software that takes advantage of its GamePad, citing the May 30th release of Mario Kart 8 and Super Smash Bros., due to be released this summer.

Eiji Maeda, an analyst at SMBC Nikko Securities Inc. in Tokyo, said for Bloomberg: “Software sales will be stronger this year than last year. Game titles such as Mario Kart 8 and Super Smash Bros. for the Wii U pull up hardware sales.”

Nintendo Co Ltd fell by 2.73% today in Tokyo to close the session at 10 670 yen, marking a one-year change of -1.57%. The video-game machines maker is valued at 1.55 trillion yen. According to the Financial Times, the 16 analysts offering 12 month price targets for Nintendo Co Ltd have a median target of 10 950 yen, with a high estimate of 19 000 yen and a low estimate of 9 000 yen. The median estimate represents a -0.18% decrease from the previous close of 10 970 yen.