Oct. 4 (Bloomberg) -- Shares of Nintendo Co., the world's biggest maker of handheld video games, surged after the company raised its profit forecast 20 percent on sales of the DS player and a weakening yen.

The stock gained 3.4 percent to 24,640 yen, the highest in a month, at the 3 p.m. close on the Osaka Securities Exchange. The shares earlier climbed to as much as 25,100 yen, their highest since Feb. 21, 2000. The forecast announcement came after the market's close yesterday.

Nintendo's touch-screen DS player and games such as Nintendogs, featuring a virtual puppy, helped the company fend off competition from Sony Corp.'s PlayStation Portable. The Kyoto, Japan-based company next month will release the Wii game console, which has a motion-sensor remote controller and a lower price than Sony's delayed PlayStation 3.

Nintendo's market share will probably ``turn up in the next cycle, assisted by the success of the DS portable game console,'' Atsuko Kaneko, an analyst at UBS Securities Japan Ltd., wrote in a note dated Oct. 3. ``Lower prices compared with competing products, active third-party game developer activity, and the postponement of the PS3's debut in Europe'' will also help market share, said Kaneko, who has a ``neutral 2'' rating on Nintendo.

Net income probably will climb to 100 billion yen ($847 million) for the year ending March 31, from a July estimate of 83 billion yen, Nintendo said in a preliminary earnings statement. The company reported a 98.4 billion yen profit a year earlier.

Sales are expected to gain 45 percent to 740 billion yen. In July, Nintendo projected sales of 640 billion yen.

Fidelity Raises Stake

Nintendo shares rose 39 percent in the past six months, compared with a 7.1 percent decline in the MSCI Japan Index of 382 companies.

The gains are benefiting funds such as Fidelity Investments Japan Ltd., Nintendo's largest shareholder and an affiliate of FMR Corp, which runs the world's biggest mutual fund.

Fidelity Investments raised its stake to 14.5 percent as of Sept. 26, from 5.83 percent at the end of March, according to filings with the Ministry of Finance.

The stock's recent gains may have pushed the share price too high, given that the Wii's introduction will shift buyer's attention from the DS player, wrote Takashi Oya, an analyst at Deutsche Bank Group in Tokyo.

``We expect the DS boom to run its course and the firm's products to compete with each other following the launch of the new Wii game console,'' Oya wrote in a report today. He cut his rating on the stock to ``sell'' from ``hold.''

The company based its profit forecast on an exchange rate of 115 yen to the dollar and 143 yen versus the euro. The yen traded at an average 113.09 against the dollar and 104.46 to the euro last fiscal year.

A stronger dollar boosts the value of Nintendo's overseas earnings when converted to yen.

The dollar traded at $1.2723 against the euro as of 3:04 p.m. in Tokyo, from $1.2733 in New York late yesterday. The U.S. currency was at 118.05 yen compared with 117.93 yen yesterday.

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.

Last Updated: October 4, 2006 02:29 EDT