TOKYO -- Nintendo's bull run crashed to a halt here Monday, with the company ending limit-down on the news that it expects only a small earnings boost from the "Pokemon Go" phenomenon.
The stock gave up 18% from Friday's close, falling by its daily limit of 5,000 yen and closing at 23,220 yen, as the value of trading sank 60% to 267.5 billion yen ($2.52 billion).
Other shares linked to the smartphone game suffered as well, becoming the top five percentage losers on the first section of the Tokyo Stock Exchange. McDonald's Holdings Japan, whose fast-food joints become "PokeStops" and "gyms" under a tie-up, ended down 12%. Short-term investors have been busy liquidating positions, a Matsui Securities official said.
"Pokemon"-related stocks had been drawing investors since the game became the top-grossing iPhone app in the U.S. on July 7. But profit-taking began to take hold when the game hit Japanese shores Friday. Nintendo announced that night that income from "Pokemon Go" will have only a "limited" impact on group earnings.
The game has already been factored into the standing forecast for the fiscal year ending March 2017, the company said. Nintendo expects pretax profit to climb 56% to 45 billion yen.
Market players no longer saw much reason to buy Nintendo. Yet the stock still has a sky-high price-earnings ratio of 80.
Tokyo-based Pokemon Co. developed the game with Niantic and is entitled to a licensing fee from the U.S. company. But Nintendo owns just 32% of Pokemon Co.
Nintendo stands to rake in 13 billion yen to more than 20 billion yen in operating profit related to the game, securities analysts estimate. The figure will be even higher if players shell out more for in-app purchases and if more companies sign on as sponsors.
"Nintendo has proven its strengths when it comes to content," said Fumio Matsumoto of Dalton Capital (Japan). With the company having shown resoundingly that it can generate earnings in the smartphone game market, "I find it hard to believe the stock price will be left undervalued," Matsumoto said.