Sony and Nintendo are expecting their consoles to remain in short supply for the rest of the year amid ongoing shortage of semiconductors. Hatem Dhiab, managing partner at investment management firm Gerber Kawasaki, joined Cheddar News to break down supply chain issues are affecting gamers who are trying to get their hands on PlayStation 5 and Nintendo Switch devices and provide guidance for investors. "I think if you like Sony before this, that should not change your opinion about the company," Dhiab said. "I don't think this is going be a huge hit with the revenue per se, but I think in reality, what these companies are doing, they're just tempering expectations really."

Closing Bell

 Long Road Ahead for Gamers Looking for New Consoles With Ongoing Chip Shortage

switching gears now. So if you thought getting your hands on a Playstation five or the Nintendo switch was hard. Now the companies that make those consoles are warning that it may get even harder. In fact, Sony Nintendo are expecting their consoles to be in short supply for the rest of the year joining now is to discuss, this is hot hot tub, Diab, managing partner of Gerber, Kawasaki in hot um what do they mean by short supply and why is this happening? Hey ken how are you? Thank you for having me. Um it's it's tough. I mean the supply chain issues that are really hurting a lot of companies and uh Sony especially makes almost of their councils in china. So the supply chain issues coupled with the semiconductor shortages are just really killing the the available available availability of these of these councils. So let's focus on Sony for a bit. The PS five has been hard to get since it launched in 2020 with all that time. Why haven't they been able to figure this out? I mean one is the PS five is very very popular. Right? So it's it's the hardest thing you you want in game and basically, but then to, it's just I don't think anybody expected the supply chain in china to get this bad. I think we all thought Covid was over and we are going to reopen and then omicron happened. So you couple that with some, so my conductor issues and then you have a situation where you just, you just can't make, you can't make enough of them now since this shortage is expected to last for the rest of the year. How should investors feel about Sony? Um, I don't think, I think if you like Sony before this, you should, that should not change your opinion about the company. I don't think this is gonna be a huge hit with the revenue per se. But I think in reality, um, the, what, what, what these companies are doing and they're just tempering expectations really. They're saying, hey, listen, it may get tougher. I want to, I want to set the right expectations for the markets. Uh, so in case things get better, we, we, we, we, we, we will, will have better numbers and I think really china is going to reopen. So assuming assuming they get, they get ahold of their, some of the microchip or some of the semiconductor issues. I think the supply chain issues will get better. Let's talk about Nintendo. Nintendo says it expects sales for switch console to fall 9% over the next year. Since is more dependent, Nintendo is more dependent on video game hardware sales than Sony. How will it make up for the drop in switch sales? Um, they have a very, very powerful software business. I mean they have, I think seven or eight games slated to come out this year. I think Nintendo does a much better job building, some really awesome games. I don't know if he heard of the game animal crossing. It's basically put him back on the map. Uh, so I think they actually there, their forecast actually says they're gonna do 14 billion in revenue, which is about what they did last year. So they will make up for these, these shortages simply because they have such a powerful slate of games. Now. A Nintendo which trades overseas, also announced a 10 for one stock split today. Can you explain what this means and why the company is doing this? Uh, so Japan, right? The, I think the price of 100 shares of Nintendo is $40,000, so that really, uh, locks up a bunch of individual investors. You know, you've got to have $40,000 to buy 100 shares. It's just prohibitive. Right? So the idea here is really to reduce the price per share so they can get more individual investors involved in, in, in, in, in the stock. Uh, this is something that we see a lot of here in the United States, you know, an individual or retail investors that are a huge part of the stock market here, but it's not the case in and outside of the US. So I think what Nintendo is trying to do is to get these, these retail investors more involved now, it's, it's not good news for gamers when there's no PS five's, but what does this console shortage mean for the retailers that carry these machines. I mean, listen, anytime you don't have a product on your shelves, that's bad for business, right? Like, you know, you don't get customers in the stores and as a result they don't, you know, they don't buy other stuff. So everyone is suffering from this I think in every product category by the way, so we need to get the supply chain issues solved because everyone is suffering from this and it just sucks, it's just unfortunate. Alright, E. A. And roadblocks are two other gaming companies expected to report earnings today after the bell. What are you expecting from them? Um rob lox is a fantastic company. Obviously the stock is going through a really tough time. The problem with roadblocks is they're basically competing with the real world, right? Like we have such tough comps where all kids were staying at home now things have opened up, you know, kids are going out there playing tennis and sports and and so forth. So the reality is just they're not gonna, the numbers are not gonna be as good, you're not gonna see see as much engagement revenues are gonna be down. Uh so they're just really in a tough tough situation because the real world is kind of winning and I think if you're a parent you want your kids to be outside and not being on roadblocks as long, you know, So let me ask you my last question for you if it's the last for the rest of the year, what does it mean come holiday season when Playstation five's Xboxes and nintendos, which are the hot ticket items on every kid's wish lists and there's none on the shelves. I mean it's, it's gonna be a lot of heartbroken kids can't get their, their, their, their, their wish list. I don't know, I guess complained to santa, It's gonna be tough, you know, I think gaming is, is always gonna be there. It's, it's a powerful trend. It's one of the fastest growing uh segment in the entertainment business and unfortunately this is gonna hurt, you know, so hopefully we get some of these supply chain issues figured out so, you know, kids can come back to gaming, you know? Alright, well we will talk around christmas over the sounds of Children crying, timothy managing partner at Gerber Kawasaki, It's always a pleasure. Thank you brother.