Home Stocks Nintendo Co., Ltd Receives A Surprise Boost From Pokemon Go

Nintendo Co., Ltd Receives A Surprise Boost From Pokemon Go

Since Pokemon Go came out to massive success, there’s been a great debate on Wall Street about just how much Nintendo would benefit from it. After all, the company didn’t make the game and only owns 32% of The Pokemon Company, which produced the game with developer Niantic Labs, a spinoff of Alphabet. Nintendo received some price target increases due to Pokemon Go’s success, but others were unconvinced that the console maker would receive any meaningful benefit from it.

Now we finally know about how much Nintendo made off the game it didn’t develop.

Nintendo posts a loss thanks to hardware

Nintendo’s operating loss amounted to ¥812 million ($7.8 million) in the three months from July to September as the Wii U console continued to weigh on its bottom line. The Japanese company hopes to switch this around (literally) with its upcoming device, the Nintendo Switch, and it certainly seems that the console can’t come fast enough. Management is betting big on the Switch, which is launching in March; they expect to sell 2 million consoles in fiscal 2017, which ends in March.

CEO Tatsumi Kimishima said that between April and September, the company recorded a profit of ¥12 billion ($111.1 million) just from its affiliates. Most of that affiliate-related profit was Pokemon-related, the executive clarified. Total net profits were ¥62.8 billion ($603 million), with most of that coming from the controlling stake in the Seattle Mariners baseball team. The stake brought Nintendo ¥62.7 billion.

Some analysts were very surprised that Nintendo booked a profit related to Pokemon products. Ace Research Institute analyst Hideki Yasuda told MarketWatch that his expectations for this item were much lower and noted that Nintendo’s portion of the profits suggest that Pokemon Go raked in more than ¥60 billion during the third quarter. However, the app’s full financial performance is unclear.

Pokemon Go benefits Nintendo in other ways

Kimishima clarified that the benefit Nintendo received from Pokemon products goes beyond Pokemon Go. In fact, the gaming company’s shares plummeted earlier this year when management issued an earnings warning about how little the smartphone app would contribute to earnings.

On Wednesday, he said it includes older Pokemon games being played on the 3DS device. It’s likely that Pokemon Go‘s popularity brought players back to those older games. Also preorders for the next 3DS Pokemon games, which are set to be released in November, were strong during the third quarter. Nintendo expects to sell 6 million 3DS handheld gaming devices in the fiscal year that ends in March. That’s an increase from the previous projection of 5 million.

In addition to the 3DS, there’s a wearable device designed to be used with the Pokemon Go smartphone app. The gaming company would not say how many of the $35 devices it sold other than to say that demand was “much higher” than it had been expecting.

Nintendo boosted its outlook for fiscal 2017 for net profits to ¥50 billion, a significant increase from the previously forecast ¥35 billion because of the sale of the Mariners interest. Operating profits are expected to be around ¥30 billion, a decline from the ¥45 million management was previously estimating.

U.S.-listed shares of Nintendo declined by as much as 4.9% to $28.13, while Japan-listed shares declined 0.67% to ¥24,520.