Nintendo surges after reporting a 428% profit spike driven by gamers flocking to Animal Crossing amid the pandemic

  • Nintendo surged as much as 6% on Thursday after the video game company said first quarter earnings soared 428% while sales more than doubled.
  • Video game companies have seen a surge in business since the COVID-19 pandemic outbreak began as consumers look to entertain and distract themselves while sheltering in place.
  • Driving the strength in Nintendo’s business included growing demand for its Nintendo Switch console, and popular software hits like “Animal Crossing: New Horizon.”
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Nintendo has seen a surge in business amid the COVID-19 pandemic, with gamers flocking to its Nintendo Switch platform now that many consumers are spending more time indoors and looking for new forms of entertainment.

Demand for its products in its fiscal first quarter led to a surge in earnings, with profits rising 428% year-over-year to $US1.4 billion, and revenue jumping 108% to $US3.4 billion, according to its earnings statement.

Nintendo’s most popular software title was “Animal Crossing: New Horizon,” which sold 10.6 million copies in the quarter, bringing its cumulative unit sales to 22.4 million.

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“Sales of this title continue to be strong with no loss of momentum, contributing greatly to the overall growth in software sales,” Nintendo said.

Nintendo’s hardware unit, which includes the Nintendo Switch and Switch Lite consoles, saw sales jump 166% year-over-year to 5.7 million units. The Switch has been sold out across the country for months, as a surge in demand was coupled with a disruption in Nintendo’s supply chain due to the pandemic.

Nintendo said that COVID-19 created “some difficulties in procuring the parts for Nintendo Switch consoles,” but the situation has since mostly recovered, according to the earnings report.

JPMorgan, which rates Nintendo as “overweight,” said in an analyst note on Thursday that it expects the Japan-based company to increase supply of its Switch console to help meet rising demand.

Additionally, the firm thinks stay-at-home demand will continue to boost sales for Nintendo in the coming months. “Some may think positives are now all out … but we see no reasons for concern about a sharp slowdown in sales momentum,” the bank said.

Shares of Nintendo’s ADR shares surged as much as 6% to $US62.20 in Thursday trades.

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