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Pokeman GO’s Earnings Played Down by Nintendo, Watches its Shares Dive

Pokeman GO’s Earnings Played Down by Nintendo, Watches its Shares Dive
A few days ago Nintendo Co has said that Pokemon GO would have a limited impact on its earnings. And soon enough he company experienced their biggest setback so far after a huge run-up on the smash-hit game with the shares of the company tumbled as much as 18 percent on Monday.
A statement from the company on Friday said that the income garnered through its 32 percent stake in affiliate Pokemon Company would be limited and that it did not plan to revise its earnings outlook for now. This statement from the Kyoto-based gaming company, which owns the licensing rights for the game, surprised markets. The company is to place its first-quarter results this week.
The stock ended down 17.7 percent, or by 5,000 yen - the daily limit allowed and recording its biggest decline since October 1990.
Stressing that it was clear the game would be key to earnings and that there were few expectations of upward revisions to its profit targets so early after the game's launch, some market players said Nintendo was being disingenuous.
"The market has overreacted to the Nintendo statement I believe that Pokemon GO will be material in the company's earnings given the current trends for the game," said David Gibson, a senior analyst at Macquarie Securities Group. With 10 million downloads in one day, the game in Japan had broken records, Gibson noted.
Nearly $12 billion in market value to Nintendo and the shares are still up some 60 percent, even with Monday's decline, compared with levels prior to the game's July 6 launch in the United States, Australia and New Zealand as Pokemon GO's success has triggered massive buying in Nintendo shares.
Given the potential for Nintendo to reap rewards from other strong character franchises as it forays deeper into mobile gaming, he still saw the company's shares as cheap, said Yasuo Sakuma, portfolio manager at Bayview Asset Management.
"Nintendo is well-placed to boost its earnings with its other characters, such as Super Mario and Zelda and their potential is unknown," he said.
As Nintendo had until recently been keen to protect its console business from cannibalization Pokemon GO is the company’s first venture into mobile gaming.
Nintendo has an undisclosed holding in Niantic Inc - the game's developer, which was spun off from Google in addition to its stake in Pokemon Company. Pokemon GO Plus - an accessory that alerts players to nearby Pokemon so that they don't have to always be looking at their smartphones is to go to sale and the company is expected to benefit from the sales. However, sales of the device have already been factored into its earnings outlook, Nintendo said.
Operating profit of the company is forecast to reach 45 billion yen ($425 million) in the year to March which notes a 37 percent rise by Nintendo which reports earnings on Wednesday. It will have to contend with a strong yen which eats into the value of earnings garnered abroad while it is expected to see upside from Pokemon GO.

A revised range from 36 billion yen to 60 billion yen is what seven analysts' estimated which been revised since the game's launch.

Christopher J. Mitchell

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