Nintendo’s Stock Rockets Higher as Switch Debuts in China

Nintendo Switch System Update 12.0.3

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Nintendo's (TYO:7974) shares soared to a 19-month high on Tuesday as the company launched its flagship Switch console in China in partnership with the Chinese tech giant Tencent (HKG:0700).

With a retail price of around 2,099 yuan ($297), the console currently supports a single launch title – New Super Mario Bros. U Deluxe Edition. Additionally, the release of Mario Kart 8 Deluxe Edition and Super Mario Odyssey on the platform is expected within the next few weeks. Keeping in view the present dearth of titles, Nintendo and Tencent are reportedly working to localize an expanded range of games. Even so, some titles such as ‘the Legend of Zelda: Breath of the Wild’ will require a protracted introduction timeline due to the complexities involved.

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The e-commerce site reported 105,000 reservations for the Switch console as of 11:30 p.m. local time on Monday. As an important caveat, it should be noted that not all reservations translate into sales and, therefore, this figure should only be viewed as an indication of euphoria surrounding the launch and not as definitive sale numbers.

Similarly, a spokesperson for the e-commerce site Fenqile informed CNBC that Switch “has been one of the most popular console products ... over the past years.”

Nintendo’s stock registered an intraday peak of ¥46,990 ($433) during the Tokyo trading session on Tuesday. This corresponds to its highest intraday level since 09th May 2018, as per the reporting by CNBC. The stock ended the day with a gain of 2.86 percent based on the closing price of ¥46,370 ($427) which, incidentally, marks the highest close for Nintendo since 30th March 2018.

According to the analysts quoted by CNBC, Nintendo is expected to sell around 100,000 Switch consoles in China during the remainder of 2019. As a reference, Nintendo has sold 41.67 million Switch units globally since the console’s debut in March 2017 (read our previous coverage here). Additionally, Wedbush Securities estimates a cumulative sale of 10 million units for Switch in China over the console’s lifetime. The brokerage did concede though that the first-year sales for the console may reach 4 million to 5 million units.

Given the broad range of estimates from analysts, it is as yet unclear how Switch will fare in China against the current dominance of free-to-play PC and mobile titles in that market. With foreign consoles being banned in China until 2014, this gaming category remains a niche and is expected to account for only 1.3 percent of the country’s total gaming revenue in the current year, according to the market research firm Niko Partners.

Nonetheless, Dr. Serkan Toto – a Kantan Games analyst – told CNBC that Switch “offers something that PCs, other consoles or phones don’t have. It boasts a wide range of exclusive software Chinese users can’t get anywhere else. It has the most popular IP in gaming worldwide, especially Mario, Zelda or Pokemon.” He went on to say that, “Nintendo and Tencent need time in China to cultivate a local fan base, build up a meaningful game library against regulations, and optimize sales.”

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In order to gain an edge over rival consoles such as Microsoft’s (NASDAQ:MSFT) XBox One X and Sony’s (TYO:6758) PlayStation 4, Nintendo has partnered with the Chinese tech giant Tencent that operates the country’s most popular messaging service – WeChat – and also boasts cloud computing capabilities. Additionally, the tech company brings China’s regulatory know-how to the table. In order to enhance the attractiveness for Nintendo’s offering in the country, Tencent is offering a one-year warranty on the console’s purchase and WeChat pay support. Tencent servers will also be deployed to facilitate online gaming on Switch.

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