Pokemon Go is a rage but its success will have limited impact on Nintendo's earnings

Pokemon Go has brought back Nintendo on everyone's lips. The Japanese video game maker, once fiercely popular, quietly but surely slipped from the minds of video game lovers and hardcore gamers as they put down the GameBoy to pick up the Sony's Playstation and Microsoft's XBox in the last few years. 

That changed, and so rapidly, that gamers and technology journalists have admitted they have never witnessed anything like it before.

After the augmented-reality-led Pokemon Go's launch on July 6 in the US and Australia, Nintendo's share price went up 9.3% on the day, and a week after, while it was still available only in few countries, the company's share price had surged 25% to 20,260 yen ($193), its highest one-day surge since 1983. In a day, Pokemon Go had added $7.5 billion to the Nintendo's market value, reports said. 

Speculations have been rife about the way forward for Nintendo, with gamers and technology watchers furiously penning blogs, but Nintendo just made a statement that led to a crash in its share price. 

Nintendo, on Monday, said that Pokemon Go's runaway success is not likely to have a huge impact on its earnings. The company is slated to announce its results on Wednesday. It said, the income generated from Pokemon Go will be limited as it only holds a 32% stake in the affiliate Pokemon Company which owns the licensing rights to the game, a Reuters report said. 

On the announcement, the Kyoto-based company's shares tanked 18% on Monday, its biggest crash since Pokemon Go was launched. The stock fell 17.7% or by 5,000 yen -- hitting the daily permissible limit -- recording its biggest decline since October 1990, the Reuters report said. 

However, some analysts believe that investors overreacted. The Reuters report quotes a senior analyst at Macquarie Securities Group, who believes that the selling spree was an overreaction. He noted that the game that just launched in Japan, the home country, had already broken records with 10 million downloads in a day. 

"I believe that Pokemon Go will be material in the company's earnings given the current trends for the game," he told Reuters. However, so far, Nintendo said it doesn't plan to revise its earnings outlook for now. 

The Reuters report says that even with the 18% fall in Nintendo's stock on Monday, its share price is still up nearly 60% from the levels seen before the game launch on July 6 in the US, Australia and New Zealand, adding nearly $12 billion to its market value. 

Another analyst said, "Nintendo is well-placed to boost its earnings with its other characters, such as Super Mario and Zelda and their potential is unknown.

A Morgan Stanley MUFG Securities equity analyst said in a note that for the game to have "a meaningful impact on Nintendo's profits, it will need to hit a minimum of $140 million to $196 million turnover per month. Mia Nagasaka was quoted in a CNBC report. 

Nagasaka added that the estimated daily turnover for Pokémon Go on the first day was around $3.9 million to $4.9 million. To give Nintendo a serious leg up earnings-wise, the app needed to be consistently at the top position for sales on app stores, the report said.

While the game is free for downloading on both Android and Apple devices in the countries where it has launched, the makers stand to make money through the in-app purchases which help boost a player's performance and through Pokemon Go Plus, an accessory that alerts players when a Pokemon is closeby. However, Nintendo said it had already factored the latter in its earnings, Reuters reported. 

For its Wednesday earnings, Nintendo expected to post a 37% rise in its operating profit to $425 million in the year to March, Reuters said. A strong yen will weigh on earnings too, it added.