Analysts Forecasting 13% Quarterly Increase in Nintendo's Net Profits

Nintendo is on the verge of revealing its financial outcomes for the third quarter on the upcoming Tuesday, with anticipations leaning towards a significant uplift in its net profit margins. Analysts surveyed by Quick foresee a 13% increment in Nintendo's net profit, reaching 130.37 billion yen ($878.6 million) for the quarter ending December 31, showcasing a notable rise from the previous year's 115.78 billion yen.

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Nintendo's Anticipated Revenue Dip in Q3

Despite the optimistic profit outlook, Nintendo's third-quarter revenue is projected to have taken a 10% dip from the previous year, totaling an estimated 573.78 billion yen. This forecast contrasts with the company's stock performance, which has experienced a 15% surge in 2024 up to Friday, further bolstered by an 18% increase during the October-December period, culminating in a closing share price of 8,476.0 yen on Friday.

Improvements in Operating Profit Margin

The first half of the fiscal year has seen an improvement in Nintendo's operating-profit margin, climbing to 35.2% from 33.5%, attributed to a slower rise in selling, general, and administrative expenses compared to revenue.

Investors are now keenly watching for any further enhancements in margins, especially under the current global economic pressures from high inflation.

Projections for Nintendo Fiscal Year Sales and Earnings

Nintendo has set its sales and earnings goals for the fiscal year ending in March, aiming to sell 185.0 million copies of Switch software and 15.0 million Switch consoles. However, the company anticipates a slight downturn in its fiscal-year revenue by 1.4% to 1.580 trillion yen, with a forecasted net profit decline of 3.0% to 420.00 billion yen.

During November 2023's earnings update, Nintendo was able to point to a 132.46 million-unit Nintendo Switch sales figure. The management's adjustments to these annual forecasts, post-holiday shopping season, are now a focal point for investors.

Boost in Nintendo's Intellectual Property Revenue

A remarkable surge in revenue from mobile and intellectual property-related income marks the first half of the fiscal year, more than doubling to 55.0 billion yen from the previous year's 23.5 billion yen. This increase owes largely to the commercial success of The Super Mario Bros. Movie released in April 2023, drawing investor attention towards the continued growth trajectory in intellectual property revenue.

As mentioned in one of our last articles last year, Nintendo's share price surged to the highest we've seen since the Wii-era of 2007, largely due to the success of IP growth.

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