Published , by Asif Khan
Published , by Asif Khan
Nintendo just released their earnings results for the third quarter of their fiscal 2019. The company lowered their Switch console unit sales guidance for the full year to 17 million from the previous forecast of 20 million. The news wasn't all bad for the beloved video game powerhouse, as they reported better than expected earnings results. Operating profit for the quarter came in at 158.6 billion yen ($1.46 billion) versus consensus analyst expectations of 149 billion yen. Nintendo was able to grow operating profit by 36% from the year ago quarter.
Nintendo Switch welcomed two more 10 million unit sellers into the club during the quarter. Super Smash Bros. Ultimate sold a staggering 12 million units in the three weeks it was for sale in 2018 and Let's Go Pikachu! and Eevee hit 10 million units sold during the quarter. Super Mario Party sold 5.3 million units during the quarter. It was on the back of these strong sales numbers that Nintendo also upped its full year software unit sales guidance to 110 million from the previous 100 million forecast.
The company also announced the delay of Mario Kart Tour, the mobile game slated to release before the end of the fiscal year. The smart device revenue segment is still puttering along with the release of Dragalia Lost helping a little, but Nintendo has yet to hit a mobile title out of the park.
The company seems to be doing well financially, and the lowered Switch guidance removes one of the biggest gripes for analysts. They should be able to easily reach their new lowered goal, having sold over 14 million Switch consoles during this fiscal year. At the end of 2018, the install base of Nintendo Switch sat at 32 million units worldwide. The company's digital business is currently growing at 95% year over year, improving their margins. Gross margin for Nintendo sits at 41% as the company has some tailwinds from a larger software sales mix.
While the company will be unable to meet their lofty original 20 million Switch unit sales projection for fiscal 2019, there are a lot of positive bits of news in this earnings report. Nintendo shares should regain some momentum if investors are able to look past the lowered Switch guidance and can focus on the earnings growth story. Nintendo shares in Germany (NTO) are currently trading down 1.68%, but we will see heavier trading in the U.S. tomorrow morning when NTDOY opens.
Full Disclosure:
At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:
Long Nintendo via NTDOY shares