Nintendo Stock (NTDOF) Sinks as Third-Party Switch 2 Game Sales Disappoint
Nintendo (NTDOF) stock was down on Friday as the video game company faces a unique problem with the Switch 2. Third-party developers aren't seeing the sales they expected from the console, despite it breaking records with 3.5 million units sold in just four days.
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One developer even claimed that sales of its games on the Switch 2 were 'below our lowest estimates.' Instead, 81% of physical Switch 2 game sales were for first-party titles, such as Nintendo's Mario Kart World or its upgraded Switch 1 games.
This could present a problem for Nintendo in the future. If third-party developers can't get their games to sell on the Switch 2, they might drop support for the console. This would reduce the variety of titles available on the gaming device, potentially limiting its appeal to consumers.
What's Behind Poor Third-Party Game Sales?
There are a couple of major problems that third-party developers have to deal with on the Switch 2. The first is Game Key Cards. These are unique cartridges sold by Nintendo that don't have the game on them. Instead, they grant the user the ability to download the game from Nintendo's online store. These are largely used by third-party developers to avoid the costs of cartridges with more storage.
The problem with Game Key Cards is that they appeal to no one. Physical collectors want the game on the cart and digital buyers don't want to have to switch between carts to play games. Game Key Cards do neither of these things. Highlighting this is the performance of CD Projekt's (OTGLY) Cyberpunk 2077. It's the best-selling third-party game on the Switch 2 and is one of the only titles not from Nintendo with the full game on the cart.
Old Games and High Prices
The next issue with third-party Switch 2 games are their age. Many of these games have been out for years on other consoles and PC before they came out on the Switch 2. On top of that, developers are charging much more for these titles, despite them being discounted on other platforms.
Yakuza 0 is a prime example of this with its $50 price tag, compared to its $20 price on Steam, and discounts that have dropped it as low as $5. This has Sega (SGAMY) asking gamers to pay more than double the normal price for a 10-year-old game just to play it on the Switch 2. On top of that, the physical release is a Game Key Card, limiting its value to physical collectors.
NTDOF Stock Movement Today
Nintendo stock was down 3.65% as of Friday morning but is still up 50.73% year-to-date. The stock has also risen 72.21% over the past 12 months. Nintendo needs to figure out its third-party game problem, or it might risk slowing or reversing its recent stock growth.
Is Nintendo Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts' consensus rating for Nintendo is Moderate Buy, based on eight Buy, two Hold, and a single Sell rating over the past three months. With that comes an average NTDOF stock price target of $92.26, representing a potential 5.11% upside for the shares.
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