Nintendo shares plunged Monday after it warned that the Pokemon Go mania sweeping the world would not translate into bumper profits, popping a dizzying rally that more than doubled the Japanese firm's market value.
The stock dived 17.7 percent to close at 23,220 yen in response to a warning after markets closed Friday that the hugely popular smartphone game would have only a ‘limited’ impact on the Japanese videogame company's bottom line. Markets had cheered the app's global success as a great sign for Nintendo's long-awaited move into the mobile games market.
The stock soared as investors bought the narrative, pushing it above 30,000 yen at one stage -- doubling Nintendo's market capitalisation and making it more valuable than Sony. But analysts warned that the rally was overdone since the actual impact of the game on Nintendo's finances would be moderate at best -- a point it confirmed on Friday.
Nintendo is the creator of the Pokemon franchise but the game, released on July 5, was developed and distributed by US-based Niantic, a spinoff of Google. Nintendo has invested in Niantic and owns about one-third of the Pokemon Company, which will get licensing fees for loaning out the cuddly monsters' brand.
Downloading the app is also free so Nintendo and others are banking on users gravitating to paid-for services in the game itself. While it stands to make money from a device to be used with the application called ‘Pokemon Go Plus’, Nintendo said ‘the income reflected on (its) consolidated business results is limited.’
‘The company is not modifying the consolidated financial forecast for now,’ its statement said. Since its launch Pokemon Go has sparked a worldwide frenzy among users who have taken to the streets with their smartphones.
The app uses satellite locations, graphics and camera capabilities to overlay cartoon monsters on real-world settings, challenging players to capture and train them for battles.
