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Founder, TrendLabs
Nintendo Stock Falls 20%—But the Rebound Case Is Growing
Written by Chris Markoch. Originally Published: 2/6/2026.
At a Glance
- 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 a market standout. It jumped 76% on anticipation of the long‑awaited Switch2. Yet traders didn't hold on: the stock is down about 20% over the past 12 months and more than 18% year-to-date as of Feb. 5.
That doesn't mean Switch2 sales were disappointing. Nintendo has sold 155.4 million units of the new console, surpassing the Nintendo DS record of 154 million. Still, investors expected even stronger results, and the headline unit figure—together with lower profit margins, cautious guidance, tariff risks and softer-than-expected holiday demand—has weighed on the shares.
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Details are still flying under the radar, but that may not last.
Still, this could be one of those "so-bad-it's-good" moments. 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 implies the strongest growth phase for the Switch2 ecosystem may be ahead. Management said active monthly users hit an all-time high and engagement rose nearly 25% year-over-year.
Those metrics indicate players aren't just buying the console — they're staying in the ecosystem. Paid Nintendo Switch Online memberships also expanded and the attach rate improved, helped by more bundled hardware options.
2026 will also see Switch2 versions of many popular Nintendo titles. Alongside new entries tied to The Legend of Zelda and Splatoon franchises, Nintendo confirmed continued development of a next-generation game engine that could support stronger long‑tail monetization on Switch2.
Taken together, those factors give investors reason to view 2026 not as a late‑cycle lull but as a platform‑expansion year.
Adding to the excitement, Super Mario turns 40 this year. To mark the milestone, a "Super Mario Galaxy" movie will be released. The Super Mario Bros. Movie's box-office success in 2023 nearly doubled the brand's licensing revenue, and management reiterated plans for cross-promotional campaigns to convert movie audiences into active players. If Galaxy performs similarly, it could boost 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 in the presentation that those headwinds are starting to moderate: contract memory prices began declining in early 2026, and NAND and DDR5 component costs have shown early signs of stabilizing.
Nintendo is also diversifying its supply chain away from China and increasing local assembly in Vietnam, steps that should help hedge against prolonged tariff risk. Combined with a favorable foreign-exchange position, these moves suggest some of the recent cost compression could be temporary.
Why the Thesis Could Be Wrong
The bullish case assumes Switch2 remains the dominant platform through 2026, but several risks could derail that view. Consumer fatigue could set in if Nintendo's first‑party release cadence slows, particularly as competitors like Sony Group (NYSE: SONY) and Microsoft (NASDAQ: MSFT) are expected to introduce hardware refreshes this year.
Hardware margins remain sensitive to component prices—memory and silicon costs could rebound rather than normalize, keeping profitability under pressure. Movie tie‑ins are also unpredictable: disappointing box-office results could hurt sentiment and licensing revenue despite past success.
Finally, the industry's shift toward cloud and subscription models is a strategic challenge. Nintendo has taken a more conservative approach to online monetization, which could leave it behind competitors on recurring‑revenue growth if player preferences shift faster than expected.
The NTDOY Chart Supports the Comeback Story
For investors who buy the bullish Switch2 thesis, the next question is whether now is a good entry point. The chart argues yes.
Recent selling pushed the stock below its lower Bollinger band — a technical sign that often precedes a reversal — and NTDOY has historically rebounded after similar signals.
The stock also looks oversold from a momentum perspective: the relative strength index (RSI) sits at 28.6. Individually, neither the Bollinger band break nor the RSI is a guaranteed buy signal, but together they suggest sentiment may be ripe for a change.
If momentum turns, investors should watch for NTDOY to reclaim the 20‑day simple moving average (SMA) — which would imply roughly a 17% gain from the price at the time of writing.
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