Nintendo Slumps After Stock Excluded From Nikkei 225

Nintendo Co. (7974), the world’s largest maker of video games, fell the most in more than two years as CLSA Asia-Pacific Markets cut the stock to sell after the company wasn’t added to the Nikkei 225 Stock Average.

The shares fell 8.4 percent to 10,860 yen as of the close of trade in Tokyo, the biggest drop since July 2011. Before today, the Kyoto-based company had gained 31 percent this year amid expectation the transfer of its listing to Tokyo from Osaka may see the stock added to the Nikkei.

Nintendo last month cut the price of its Wii U video-game console in the U.S., ahead of new machines from Sony Corp. and Microsoft Corp., amid stalling sales and delays to new software titles. President Satoru Iwata took the helm of U.S. operations to drive growth as combined sales for its hardware totaled 1.8 million units in the quarter ended June, down from 3.1 million units a year earlier, as customers migrate to mobile devices for playing online games.

“The early signs of key first-party software inducing a major turnaround in Wii U console fundamentals are not promising, and the outlook for third-party support is grim,” Jay Defibaugh, an analyst at CLSA in Tokyo, said in a report in which he cut the stock to sell from buy. “The value of iconic Nintendo franchises may be declining as younger generations discover gaming through mobile devices.”

Photographer: Scott Eells/Bloomberg

Nintendo Co.'s Super Mario is displayed on coffee mugs for sale at the Nintendo World store in New York. Close

Nintendo Co.'s Super Mario is displayed on coffee mugs for sale at the Nintendo World store in New York.

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Photographer: Scott Eells/Bloomberg

Nintendo Co.'s Super Mario is displayed on coffee mugs for sale at the Nintendo World store in New York.

Nikkei Review

Nintendo shifted its main listing after the merger of the cash-equities platforms of the Tokyo and Osaka stock exchanges, a move that would have made it eligible for inclusion for the Nikkei. Nikkei Inc., which compiles the Nikkei 225, said Sept. 6 it will add Nitto Denko Corp. (6988) and Tokyu Fudosan Holdings Corp. (3289) to the measure. The changes to the gauge are the first since the bourse merger.

“We believe Nintendo’s shares have been overvalued due to speculative demand, on the assumption that they would be included in the Nikkei,” Takao Suzuki, an analyst at BNP Paribas SA in Tokyo, said in a Sept. 6 report. “As this expectation has come to nothing, this appears to be the right time to sell.”

The Kyoto-based game-maker, which has a market value of $15.4 billion, may be considered too big for addition to the gauge, Nomura Holdings Inc. quantitative analysts led by Tomoyo Izumi and Mizuho Financial Group Inc. (8411) analysts headed by Hayato Nagayoshi wrote on June 28.

A review of membership in the Nikkei 225 is typically held once a year in autumn and implemented in early October, according to the Nikkei website. An extraordinary replacement can be announced in the event of bankruptcy, mergers or corporate restructuring, it said.

Photographer: Tomohiro Ohsumi/Bloomberg

People past through the gate to the Nintendo Co. headquarters in Kyoto. Close

People past through the gate to the Nintendo Co. headquarters in Kyoto.

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Photographer: Tomohiro Ohsumi/Bloomberg

People past through the gate to the Nintendo Co. headquarters in Kyoto.

While Nintendo’s 3DS handheld player enabled the company to hold the position as the most popular platform in the U.S. in August for a third month, the Wii U has foundered on a lack of its own new titles and those of third-party developers. The company will start selling an entry-level 2DS portable machine going on sale Oct. 12 for $129.99.

The company, which created blockbusters like Super Mario, Zelda and Donkey Kong in the 1980s, has struggled to adapt to a consumer shift to smartphones and tablet computers.

To contact the reporters on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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