Nintendo stock faces holiday test after Switch 2 sales drop 41%

Nintendo’s US-listed shares (NTDOY) have lost more than 40% over the past year, a decline that has intensified scrutiny on the company’s ability to recover as the holiday season approaches. The latest earnings report showed Switch 2 sales plunging 41% year-over-year, while operating profit fell 16% to ¥73.9 billion, missing analyst expectations.

Earnings Miss and Sales Pressure

The financial results indicate significant headwinds for the company. Despite the drop in hardware sales, Nintendo has maintained its annual target of 16.5 million Switch 2 units. However, the company sold only 6.49 million consoles during the first six months of the fiscal year. This leaves a gap of 10 million units that must be sold before March 2027 to meet the forecast.

Profitability remains a central concern for investors. In September, Nintendo raised the US price of the Switch 2 to $499.99. Management stated that rising memory-chip costs continue to pressure margins, though the company said another immediate price increase is not planned. These cost pressures contributed to the operating profit missing market expectations in the latest report.

Zelda Remake and Holiday Outlook

The company’s primary strategy for the upcoming holiday quarter centers on the release of The Legend of Zelda: Ocarina of Time, which arrived on November 5. Nintendo President Shuntaro Furukawa described the game’s launch as a “very strong start.” The remake has also drawn attention for a reported infinite-jump glitch, a development that may appeal to the speedrunning community.

Citi analysts suggested that the new Zelda title could serve as a key driver for holiday console purchases. “Given these growth drivers, we believe the shares will recover following a temporary correction,” the bank wrote. Analysts currently maintain a Buy rating on Nintendo stock with a 24% upside target. The Christmas quarter will serve as the first major test of this recovery thesis, with strong holiday sales potentially supporting the bank’s outlook.

There are some positive indicators in the software segment. Switch 2 software sales rose 18.8% during the first half of the year, suggesting that existing console owners are continuing to spend on games. The next few months will determine whether the company can convert this software momentum into the hardware sales needed to meet its annual targets.