Nintendo (NTDOY) earnings down 45%, despite Switch sales growth The most recent quarter for Nintendo was a mixed bag for investors. Please take a look at our breakdown of the Big N's financial results.

It's earnings release season, and that means Nintendo is once again doomed. The Big N just reported a year-over-year decrease in earnings due to 12 billion yen foreign exchange loss and "other factors." More puzzling is that the company's flagship Nintendo Switch hybrid handheld console saw sales grow from the previous year's period.

Nintendo's earnings per share saw a 45% decline from the same quarter in 2018.

Well, that's it. Nintendo is clearly doomed, right? Hold your horses, bears. There were some good nuggets of information in this earnings results release that could indicate the Switch still has legs. Overall Net Sales at Nintendo were up 2.4% from the prior year period coming in at 172.1 billion yen. During the same quarter in 2018, Nintendo had a tailwind from foreign currency tranlatation. Unfortunately, the yen has appreciated in recent months against the dollar and the euro, which has resulted in a headwind for Nintendo's bottom line growth as those regions represent a large chunk of sales.

Foreign currency translation lead to a nearly 20 billion yen year-over-year swing in operating profits at Nintendo.

I did mention that things aren't all that bad, right? Nintendo announced that the Switch has sold nearly 37 million units and recently released Super Mario Maker 2 sold 2.4 million units in just three days. Digital sales of software are also rapidly growing at Nintendo coming in up 65% from a year ago. Digital game sales made up 38% of the company's software revenue in the quarter, which is an all-time high for the Big N.

Nintendo seems to have overcorrected when it comes to providing guidance, as the company did not alter their sales projections provided on April 25, 2019. This is surprising, considering the new $199 Nintendo Switch Lite dedicated handheld had not been announced at the time. It seems rather dubious that Nintendo doesn't seem to think that cheaper, smaller Switch iteration will have no effect on unit sales, as the company has maintained its 18 million unit Switch sales guidance for fiscal 2020. While currency may remain a headwind for earnings at the company, it is pretty insane to think that Switch Lite won't increase the number of units Nintendo moves going into their crucial Holiday 2019 season.

The company touted the strong lineup of first party titles hitting Switch later this year, with the releases of Luigi's Mansion 3, Link's Awakening, and Pokemon Sword and Shield hopefully providing some added momentum going into the end of the year. The next major catalyst for investors to watch will be the release of Nintendo Switch Lite in September.

Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Nintendo via NTDOY shares