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Nintendo Shares Tank 5% As New “Switch” Console Underwhelms

Friday, January 13, 2017 10:25
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Nintendo Co., Ltd (OTC:NTDOY) finally released some real details about its new home video game console, dubbed Switch, and the market reaction has been to sell off its stock in droves.

The exact reasons why Nintendo is plunging so much aren’t completely clear, but the console’s unconventional (read: hard-to-wrap-your-head-around) design and relatively high price tag probably have a lot to do with it. Nintendo said Switch would be initially priced at $299, which is at or above the entry level models of the Xbox One and Playstation 4. Considering Switch’s likely lackluster processing specs and strange form factor, it’ll probably be hard for most gamers to justify the purchase.

Console wars aren’t won amongst hardcode gamers, of course — it’s the casual gaming market that determines the winners and losers. The beauty of Nintendo’s all-time best selling home console — the Wii — was in its absolute simplicity. The Switch seems anything but simple, in contrast.

Switch features a dock that connects to a user’s TV, which a tablet device drops into for home use. When on the go, the tablet comes out of the dock and gets controller pieces attached to both sides of it. During home mode, those controller pieces attach to a central battery pack of sorts. If that sounds strange, it’s because it is.

Nintendo is trying to blur the lines between home gaming and mobile gaming, but the Switch — at least at first glance — really doesn’t seem to be the answer. It’ll be a hard sell to get gamers, especially casual ones, to shell out $300 for the device, and hardcore gamers will probably laugh Switch off as an underpowered novelty with an identity crisis.

So far today, the market agrees. Nintendo’s U.S.-listed shares fell $1.53 (-5.54%) to $26.07 in Friday morning trading. Year-to-date, the stock is essentially flat, but has gained some 63% in the trailing twelve months.

U.S.-based investors looking for diversified exposure to the video game industry should consider the FactorShares Trust PureFunds Video Game Tech ETF (NYSE:GAMR), which was trading at $30.91 per share on Friday morning, up $0.05 (+0.16%). Year-to-date, GAMR has gained 2.86%, versus a 1.70% rise in the benchmark S&P 500 index during the same period.

Due to its young age, GAMR doesn’t currently have an ETF Daily News SMART Grade, but we’ll be sure to rate the fund once it gets a bit more trading history under its belt.

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