Despite the Nintendo Switch performing extremely well and the Nintendo 3DS continuing to chug along, analysts and investors are completely befuddled as to why Nintendo has just suffered the biggest two-day drop in 18 months. Some think that the reason could be that Nintendo won’t show enough surprises at E3 while others are worried about Nintendo’s paid online offering which launches in September.
“Analysts reported getting dozens of inquiries on Monday from hedge funds and investors eager to understand the sell off. Theories ranged from falling expectations for positive surprises at next week’s Electronic Entertainment Expo conference, known as E3, to troubles with Nintendo’s online games. Many also pointed to quantitative traders selling on weakening momentum, although short-interest remained low by historic standards.”
“What is shocking is that recently there has been a lot of good news related to Nintendo,” Jefferies Group analyst Atul Goyal wrote in a report to clients, blaming the drop on traders who rely on technical chart analysis to make investment decisions. “Nevertheless, if chartists are giving a diametrically opposite view, we take this as an opportunity to reassess and review.”
“The market is probably selling shares ahead of E3 because people are concerned Nintendo doesn’t have a pipeline that will wow investors to a point where analysts will have to raise earnings targets again,” said Amir Anvarzadeh, a senior strategist at Asymmetric Advisors in Singapore, who said he got three calls from investors about Nintendo this morning. “The other question is whether their network infrastructure is really ready to cater to online gaming.”
“They’re years and years behind on the network business,” said Anvarzadeh. “That doesn’t mean they can’t catch up, but Sony spent billions on fortifying the PlayStation Network expansion.”