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Game over for Nintendo?

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While people were bored at home during the corona pandemic and the number of psychological complaints increased, the game Animal Crossing: New Horizons provided millions of people with some distraction.

Gamers start a life on a tropical island, where they spend their days looking for shells, chatting with (anthropomorphic) neighbors, and furnishing their house to their own taste.

The Japanese game became one of the blockbusters of the pandemic, and also boosted sales of its companion game console Nintendo Switch. Like many other gaming stocks, Nintendo benefited from the lockdowns. In Tokyo, the stock cost about $50 before the pandemic, having risen above $80 at the beginning of this year. Nintendo was worth over $75 billion, making it one of the most valuable game companies in the world.

But in the game world, developments go so fast that a game is old after a year and a game computer after a few years. Nintendo already presented the Switch in 2017, and gamers want something new. So investors expect that too. This summer, the company announced a new version of the Switch, with better picture and sound, and more storage space. The upgraded Switch will hit the market on Friday.

However, investors have already given the new Switch an unsatisfactory rating. They had hoped for support for 4K images, with many more pixels so that the games would look better. That should have led to new sales records around Christmas. The competing Playstation 5 (Sony) and Xbox (Microsoft) do support 4K.

Nintendo’s share price has fallen back to pre-coronavirus levels since July. The company is now worth just over $50 billion. Popular investor Cathie Wood also decided not to wait for the new Switch, it turned out on Wednesday. Her fund Arkk Innovation ETF has sold off most of its shares in Super Mario‘s company. In February, Wood still held 4.7 million shares of Nintendo, now there are only 1,500, with a value of just about $83,000.

Nintendo has only been part of the Japanese main index Nikkei 225 since last week. The rule was that companies were not allowed to have a weight of more than 1% of the price-weighted index, thus excluding heavyweights like Nintendo. Now the share is finally in the main index, but the hoped-for price increase did not materialize: Nintendo actually fell further last week.

Other Japanese stocks are not doing much better. Tuesday even threatened a correction for the Nikkei, but a 10% loss since the peak in mid-September just failed to materialize. Investors fear the Chinese real estate troubles surrounding Evergrande, and the policies of the new Japanese Prime Minister Fumio Kishida. He wants to increase the capital gains tax, which could now lead to a stock sell-off, as investors want to avoid the higher tax in the future.

Image Credit: Getty

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