Investors react to Nintendo’s profit revision yesterday.
TOKYO, Oct 2 (Reuters) - Shares in Nintendo Co Ltd, the world's second-largest home videogame maker, took a battering on Wednesday after it trimmed earnings forecasts and its shipment target for game consoles.
Nintendo's shares ended down 6.96 percent at 12,840 yen, underperforming Tokyo's benchmark Nikkei average, which fell 1.23 percent.
The maker of the GameCube home videogame system announced late on Tuesday that it had slashed its recurring profit forecast for April-September by 77 percent due to an appraisal loss on its hefty foreign-currency-based assets.
The rise in the yen against the dollar during the six months reduced group sales by 4.5 billion yen ($36.71 million) and resulted in an appraisal loss of 29 billion yen on foreign-currency-denominated assets, it said.
Recurring profit is pretax and excludes extraordinary items.
Faced with slack demand for its game systems in Japan and Germany, Nintendo also trimmed its 2002/03 shipment target for GameCube by 17 percent and for Game Boy Advance by 21 percent.
The revision prompted sell orders.
Nikko Salomon Smith Barney analyst Soichiro Fukuda downgraded his rating on Nintendo to 3H from 2H and cut its target price to 13,500 yen from 18,200 yen. Nikko's 3H rating corresponds to underperform and high-risk, while 2H is neutral and high-risk.
Eri Sato, an senior analyst at Goldman Sachs, said she was revising her outlook on Nintendo to reflect the company's announcement, but would maintain her view that GameCube will grow in the medium term, taking a bigger global market share than Microsoft Corp's Xbox.
"Shares in Nintendo may come under pressure in the short term, but that would provide a good buying opportunity," she said.
Investor worries over Nintendo's huge appraisal loss on foreign currency-denominated assets due to the yen's strength have weighed on its shares, sending them down by more than 40 percent so far this year.
