Video Game ETFs In Focus As Nintendo's Sales Take A Dive

According to a CNBC article, Nintendo NTDOY experienced a decline in both its profits and sales, attributed to a fall in the sale of its flagship gaming console, the Nintendo Switch. Covering the period from April 2022 to March of this year, Nintendo reported revenue of 1.6 trillion yen for its full fiscal year, aligning with its own forecast but reflecting a 5.5% year-on-year decrease.

Net profit for the year was down more than 9% year-on-year, at levels of 432.7 billion yen. However, the company performed better than its own estimate of 370 billion yen. The box office success of "The Super Mario Bros. Movie" has exceeded expectations, enabling Nintendo to expand its business beyond consoles and venture into diversified avenues.

Nintendo Switch Sales in Numbers

The Japanese gaming giant managed to sell 17.97 million units for the fiscal year from its renowned Nintendo Switch console series, meeting its own projection of 18 million units. However, this figure represents a 22% decrease compared to the previous fiscal year, which saw sales of just over 23 million Switch units.

According to Nintendo, production was affected by semiconductor and component shortages until approximately the end of summer. Additionally, the company also stated that it did not witness the same level of sales growth during the holiday season as it had experienced in the previous year.

Nintendo is gearing up to launch The Legend of Zelda: Tears of the Kingdom, an eagerly anticipated installment in one of its flagship franchises. However, the company anticipates a continued decline in software sales, projecting 180 million units for the current fiscal year. Nintendo also disclosed its expectation of a 21.4% decrease in net profit, forecasting it to reach 340 billion yen by the end of March 2024.

Has Switch Sales Reached its Peak?

Per Reuters, the Kyoto-based gaming company continues to strengthen its games portfolio and overcome supply chain challenges; it recognizes the waning demand for the Nintendo Switch, now in its seventh year on the market. Investors fear that the sale of the aging console has peaked.

Industry experts believe that the launch of a potential successor to the Nintendo Switch, despite its remarkable sales of over 125 million units, is unlikely to happen this fiscal year, according to the company's guidance.

ETFs in Focus

Below, we highlight a few ETFs with exposure to Nintendo.

Roundhill Video Games ETF

The Roundhill Video Games ETF NERD offers investors exposure to the video game sector by providing investment results that closely correspond to the performance of the Nasdaq CTA Global Video Games Software Index.

The fund has 38 securities in its basket, with Nintendo being a highly allocated company with a share of 16.69%. NERD also has an allocation in companies like Electronic Arts EA and Roblox RBLX, with 10.35% and 6.22% shares, respectively.

The fund has an asset base of $26 million and charges an annual fee of 0.50%. It trades at a daily average volume of about 3,700 shares. NERD has generated returns of 10.75% year to date and earned 7.30% in the past three months.

Wedbush ETFMG Video Game Tech ETF

The Wedbush ETFMG Video Game Tech ETF GAMR seeks to provide investment results that correspond generally to the price and yield performance of the EEFund Video Game Tech Index. The fund has a basket of 87 securities and has exposure to Nintendo with a share of 2.60%. The top allocated company in the fund is UbiSoft Entertainment UBSFY with a share of 3.07%.

GAMR has gathered an asset base of $51.36 million and charges an annual fee of 0.75%. It has a traded daily average volume of around 3,200 shares. The fund has earned returns of 8.45% year to date, along with 1.4% in the past three months.

Global X Video Games & Esports ETF

The Global X Video Games & Esports ETF HERO seeks to provide investment results that correspond generally to the performance of the Solactive Video Games & Esports Index. With an asset basket of $51.32 million, the fund has exposure of 5.78% to Nintendo. Take-Two Interactive Software TTWO is the highest allocated company in HERO.

Charging an annual fee of 0.73%, the fund has a traded daily average volume of about 16,000 shares. HERO has earned 8.0% year to date and 2.74% over the past three months.

VanEck Video Gaming And ESports ETF

The VanEck Video Gaming and Esports ETF ESPO seeks to replicate as closely as possible the performance of the MVIS Global Video Gaming and Esports Index. The fund has a basket of 26 securities and has exposure of 5.90% to Nintendo. NVIDIA NVDA is the top allocated firm in the fund.

Having amassed an asset base of $280.16 million, the fund charges an annual fee of 0.56%. It has a traded daily average volume of about 39,000 shares. The fund has generated returns of 20.89% year to date and 7.43% over the past three months.

Image by Brandon Romanchuk in Unsplash