Nintendo’s Market Cap Rises Past Sony, Thanks To The Switch

Last year, it was Pokemon Go that helped Nintendo surpass (though briefly) peers like Sony in market cap. This time, the Nintendo Switch has given a lead to the company over Sony. According to Nikkei, Nintendo’s market cap reached 5.44 trillion yen ($48.9 billion) on Friday, compared to Sony’s 5.4 trillion yen.

Will Nintendo’s market cap lead hold?

Robust sales of the Switch have pushed up Nintendo’s stock price, and the company’s overall market value has hit its highest level since 2008. It must be noted that Nintendo’s market cap has surpassed the whole of Sony’s, including every division like electronics, music, movie and TV.

Nintendo’s market cap also surpassed Sony’s market cap 11 months ago (thanks to Pokemon Go) and a decade ago (thanks to the Wii). A few enthusiasts, however, note that the difference in the market cap is very narrow this time; therefore, Sony can bounce back like it did after the Pokemon Go rage eased last year. Last year, Nintendo’s market cap increased briefly due to the success of Pokemon Go, but it could not retain that position for long.

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From what Nikkei has to say, it appears that Nintendo’s market cap rose after the company decided to ramp up Nintendo Switch production and shipments this summer. Nintendo also made it clear that the supply shortage for the console is not cooked up, but rather, a genuine supply issue.

“For autumn and beyond, we will continue to work to ensure that as many products as possible can be delivered to our customers towards the end of the year,” the company said earlier.

For two months in a row, the Nintendo Switch has been ahead of the Xbox One and PS4 in sales, but in June, the PlayStation 4 was the top-selling console, notes GameSpot. Strong sales of the PS4 are holding the battle for Sony, but once the supply of the Switch normalizes, Nintendo could be a problem for Sony.

Though the Nintendo Switch is playing a major role in pushing Nintendo’s market cap up, other divisions such as Nintendo’s mobile division and the 3DS system family are also helping the company.

Analysts bullish on Nintendo

Nintendo started with a plan to sell about 10 million consoles in the year ending March 2018. But according to Masahiro Ono of Morgan Stanley MUFG Securities, investors are hoping that the number will surpass the original plan. Further, retail investors are positive on Nintendo, and this has counterbalanced the selling by U.S. investment adviser Capital Research and Management. The investment adviser lowered its stake in the gaming company from 10.39% to 9.31%, notes Nikkei.

Macquarie Capital Securities analyst David Gibson estimates that Nintendo will sell 14.5 million consoles or maybe more in the fiscal year ending in March. Although demand for the Switch is strong, Apple’s new iPhone 8 could slow down the production line by blocking some of the key components that go into the Switch, including the LPDDR4 RAM and flash memory, notes TweakTown.

According to analysts, Nintendo could post a profit of 93.1 billion yen, two times Nintendo’s own projection for the ongoing fiscal year ending in March.