Nintendo Shares Dive Despite Pokemon GO Success

Shares (Berlin: DI6.BE - news) at Nintendo have plunged significantly, marking the gaming giant's greatest drop in 26 years, after it warned Pokemon GO would have a 'limited' impact on its profits.

In the company's biggest setback since the launch of the mobile game app caused shares to almost double in value at the beginning of July, Nintendo shares dropped 17.7%.

It's after the gaming company stated on Friday that profits earned from its affiliate stake in Pokemon Company, which owns the licensing rights to the sell-out game Pokemon GO, would be limited, and it did not plan to revise its earnings outlook for now.

The company's statement also pointed out that Nintendo does not make or own Pokemon GO which "is developed and distributed by Niantic, Inc," but both Google and Nintendo hold a stake in it.

Whilst it appears to have taken investors by surprise, some analysts are saying the market has "overreacted" to the Nintendo statement.

Noting that the game had broken records with 10 million downloads in one day in Japan, David Gibson, a senior analyst at Macquarie Securities Group said:

"I believe that Pokemon GO will be material in the company's earnings given the current trends for the game."

It's the Japanese firm's biggest decline since October 1990, when shares plummeted 22.6%, however the global success of Pokemon GO has still triggered a huge buy-up of Nintendo shares.

Even (Taiwan OTC: 6436.TWO - news) with Monday's decline, shares are still up 60%, since the game was released on 6 July, adding nearly $12bn (£9bn) to its market value.

Pokemon GO is Nintendo's first venture into mobile gaming, but Yasuo Sakuma, portfolio manager at Bayview Asset Management, says the company still has the potential to profit from other strong character franchises as it continues to explore mobile gaming.

"Nintendo is well-placed to boost its earnings with its characters, such as Super Mario and Zelda and their potential is unknown," he said.

The company, which is due to release its first-quarter results on Wednesday, has forecast a 37% rise in operating profit in the year to March.