Nintendo (7974) falls 3.2% as Daiwa cuts target on Switch 2 cost concerns
Concerns over increased manufacturing costs for the next-generation Switch 2, coupled with a significant price target reduction from Daiwa Securities, sent Nintendo Co., Ltd. (7974) shares down today. The Japanese gaming giant's stock fell 3.2%, trading at ¥7,953, a decline from its previous close of ¥8,220.
The primary catalyst for the decline is investor apprehension regarding rising semiconductor memory prices, which are expected to inflate Switch 2 production expenses. Further dampening sentiment, Daiwa Securities cut its target price for Nintendo on April 24, reducing it from ¥13,000 to ¥9,000. The company's shares also fell on April 24 following reports of Switch 2 production cuts.
Profitability concerns persist following the fiscal year 2026 third-quarter results, which indicated an estimated loss of ¥25,000 per Switch 2 unit, based on an estimated selling price of ¥41,000, despite 4.78 million units sold in Japan. The ongoing AI boom, contributing to memory shortages, further exacerbates future production risks for the console.
Rising Production Costs Weigh on Nintendo's Future Profitability
Nintendo Co., Ltd. is a major entertainment company known globally for bringing gaming experiences into homes. They primarily design and sell popular video game consoles, such as the Nintendo Switch, alongside developing blockbuster software titles like The Legend of Zelda and Super Mario. Their business model is built on integrating both hardware and high-profit software, meaning they make money not just from selling consoles, but significantly from the games that run on them.
The key factor influencing Nintendo's share price today is investor concern over increasing manufacturing costs for its upcoming next-generation console, the Switch 2. Specifically, a surge in semiconductor memory prices is expected to push up the per-unit production expense for the new hardware. This potential squeeze on profit margins, alongside Daiwa Securities lowering its price target for Nintendo on 24 April 2026, has dampened investor sentiment.
This worry about higher production expenses has directly impacted the stock today. Nintendo's shares are currently trading at ¥7,953, reflecting a 3.2% drop from yesterday's close of ¥8,220.
Imagine a highly anticipated film production where, midway through filming, the cost of special effects or a key actor's salary unexpectedly skyrockets. While the film is still expected to be a hit, the increased expenses mean the studio's overall profit from its box office success will be significantly lower than initially projected. This reduced profit outlook can make investors less enthusiastic about the studio's stock.
Nintendo Co., Ltd.
Nintendo Co., Ltd., together with its subsidiaries, develops, manufactures, and sells home entertainment products in Japan, the Americas, Europe, and internationally. It offers video game platforms, playing cards, Karuta, and other products; and handheld and home console hardware systems and related software. The company was formerly known as Nintendo Playing Card Co., Ltd. and changed its name to Nintendo Co., Ltd. in 1963. Nintendo Co., Ltd. was founded in 1889 and is headquartered in Kyoto, Japan.