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Nintendo Stock Falls 20%—But the Rebound Case Is Growing
Written by Chris Markoch. First Published: 2/6/2026.
Article Highlights
- Nintendo shares have pulled back sharply despite strong console-unit milestones, creating a potential 2026 rebound setup.
- Engagement, software releases, and brand licensing could support Switch2 ecosystem growth through 2026.
- Easing input costs and supply-chain shifts may help margins, while technicals suggest oversold conditions.
In the first half of 2025, Nintendo (OTCMKTS: NTDOY) was not only one of the best-performing consumer discretionary stocks but also a market standout. It surged 76% on excitement about the company's long-awaited Switch2 release. However, traders didn't stay long: the stock is down 20% over the last 12 months and more than 18% year-to-date as of Feb. 5.
That doesn't appear to be because Switch2 sales disappointed. Nintendo has sold 155.4 million units of the new console, surpassing the previous record of 154 million set by the Nintendo DS. Still, some investors expected better, and that—combined with weaker profit numbers, cautious forward guidance, tariff risks and softer-than-expected holiday demand—has weighed on the shares.
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Watch the video to get the ticker nowThat said, this might be a "so bad it's good" setup. There are several catalysts suggesting 2026 could be a rebound year for NTDOY.
The Best May Be Yet to Come for Switch2 Sales
Nintendo's latest investor presentation indicates the most significant growth phase for the Switch2 ecosystem may still be ahead. The company said active monthly users reached an all-time high and engagement rose nearly 25% year over year.
That's an encouraging sign that players aren't just buying consoles but remaining active in the ecosystem. The paid Nintendo Switch Online membership base expanded, and attach rates improved thanks to more bundled hardware options.
2026 will also see Switch2 versions of many top franchises. Alongside upcoming releases tied to "The Legend of Zelda" and "Splatoon," Nintendo confirmed ongoing development of a next-generation game engine, which could boost long-tail monetization for Switch2 titles.
All of this gives investors reason to view 2026 not as a late-cycle phase but as a platform-expansion year.
Adding to the momentum, Super Mario turns 40 this year. To celebrate, a Super Mario Galaxy movie will be released. The box-office success of "The Super Mario Bros. Movie" in 2023 nearly doubled the brand's licensing revenue, and management reiterated plans for cross-promotional campaigns aimed at converting movie audiences into active players. If the upcoming Galaxy film performs similarly, it could spark both console and software demand heading into the holiday season.
Cost and Tariff Headwinds Could Ease
Recent margin pressure largely came from higher memory prices and elevated transport and tariff expenses. Management noted during the presentation that these headwinds are starting to moderate. Contract memory prices began falling in early 2026, and component costs for NAND and DDR5 memory have shown early signs of stabilization.
Nintendo also said it is diversifying its supply chains outside of China and increasing local assembly in Vietnam. Those moves should help hedge against prolonged tariff risk. Combined with a favorable foreign-exchange backdrop, these measures suggest much of the recent cost compression may be temporary.
Why the Thesis Could Be Wrong
The bullish case assumes Switch2 remains the dominant platform through 2026, but there are real risks. Consumer fatigue could emerge if Nintendo's first-party release cadence slows, especially as Sony Group (NYSE: SONY) and Microsoft (NASDAQ: MSFT) are expected to introduce hardware refreshes this year.
Hardware margins are also sensitive to component pricing—memory and silicon costs could rebound rather than normalize, leaving profitability under pressure for longer than expected. And while franchise-based films have driven engagement, box-office results can be unpredictable; a disappointing release could hurt sentiment and licensing revenue.
Finally, the industry's shift toward cloud and subscription models remains a strategic challenge. Nintendo's more conservative approach to online monetization could leave it trailing competitors on recurring-revenue growth if player preferences accelerate toward subscriptions.
The NTDOY Chart Supports the Comeback Story
For those who buy the bullish case for Switch2, the next question is whether now is a good entry point. The chart supports that view.
Recent selling has pushed the stock below its lower Bollinger band—a technical signal that can indicate a potential trend reversal—and NTDOY has historically shown rebounds after similar moves.
The stock also looks oversold on momentum: the relative strength index (RSI) is 28.6. Neither signal on its own is a guaranteed buy trigger, but together they point to the possibility of shifting sentiment.
If sentiment does turn, investors should watch for NTDOY to reclaim the 20-day simple moving average (SMA), which would imply roughly a 17% gain from the current price as of this writing.
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