Nintendo stock falls as Switch 2 price rises and sales are expected to decline

Nintendo Stocks plunged on Monday after the gaming giant warned that sales of its flagship Switch 2 console would decline this fiscal year and raised prices for the device due to rising memory costs.

Nintendo stock closed 8.4% lower at 7,020 yen in Tokyo, the lowest price since August 2024. The stock price has fallen 34% this year.

On Friday, Nintendo announced price hikes for its Switch 2 console in markets around the world as an unprecedented rise in the price of memory chips due to the AI ​​infrastructure boom has increased the cost of manufacturing the devices.

Nintendo said it expects to sell 16.5 million Switch 2 units this fiscal year ending March 2027, down from 19.86 million units sold since its launch last June. Sales of game consoles that have been on sale for less than a year are expected to decline, raising concerns among investors.

“Nintendo expects Switch 2 hardware sales to decline this fiscal year, rather than increase as is typically the case for new consoles,” Kantan Games CEO Serkan Toto told CNBC on Monday.

“The biggest factor is, of course, the price hike, which Nintendo believes will lead to a decline in demand.”

Nintendo has a reputation for issuing conservative guidelines. Toto said the latest numbers are probably no different.

“I think Nintendo will be as low-key as usual because users will get used to the new price of the console over time,” Toto said.

Kazunori Ito, a director at Morningstar, said in a memo on Sunday that Nintendo’s guidance was “overly conservative.”

“Given long-term inflation in memory costs, we believe console price increases are inevitable. While the weak shipment outlook likely reflects over-cautious demand, the price increases themselves have been modest and we expect shipments to hold up better than the company expected,” Ito said.

The price of the Switch 2 has increased by $50 in the US and by 10,000 yen ($64) in Japan.

Ito said he expects Switch 2 sales to reach 19 million units this fiscal year, compared to Nintendo’s own prediction of 16.5 million units.

“I believe Nintendo stock is undervalued,” Ito said. “The market appears to be overly focused on short-term headwinds and conservative guidance, but underestimates the long-term revenue growth from over 100 million Switch users moving to the new platform and increased game purchases.”

Another metric the market was looking at was Nintendo’s software or game sales, as blockbuster titles can drive hardware sales.

The Japanese gaming giant said it expects software sales for the original Switch and Switch 2 to reach a total of 165 million units in the fiscal year ending March 2027. This is a decrease of approximately 11% compared to the previous year.

“The decline in game shipment expectations year-on-year may indicate that Nintendo lacks confidence in its pipeline,” Morningstar’s Ito said.

“However, we believe this is too pessimistic, as user engagement typically accelerates in the second year of a console cycle,” he said, adding that Morningstar forecasts software sales of 205 million copies, which is higher than Nintendo’s own forecasts.

Nintendo has had some success with early games on the Switch 2, including “Mario Kart World” and “Pokémon Pokopia,” which became unexpected viral hits, selling more than 4 million copies in the five weeks following their release in March.

But investors are waiting for more details about Nintendo’s game pipeline, especially upcoming games featuring some of its most iconic characters like Mario and Zelda. Investors will be watching closely to see when the company will announce its Nintendo Direct event, where it typically unveils upcoming blockbusters.

“There should be a new Nintendo Direct presentation as early as next month summarizing the 2026 software lineup,” Toto said.