Shares in Nintendo tumbled by nearly a fifth on Monday after it warned of a third straight year of operating losses, heaping pressure on the creator of "Super Mario" to abandon its policy of not licensing its software to rivals.
After the market close on Friday, the Kyoto-based company slashed its global Wii U sales forecast for the year to March 31 by almost 70 percent to 2.8 million units.
"Its console-based business model spells doom for stakeholders. It has no choice but to accept the change," Jefferies analysts wrote in a note. "We believe Mario on mobile is coming."
(Read more: Nintendo heads for loss as Wii U flops)
They raised their price target on Nintendo to 29,000 yen from 26,550 yen, with a 'buy' rating on expectations of a change in strategy.
Nintendo has so far refused to allow its games to be played on consoles built by competitors or on tablets or other mobile devices that are increasingly used by gamers.
At one stage, the shares fell as much as 18.5 percent. By 0104 GMT, the stock was down 11.9 percent at 12,900 yen. It was the most traded stock on the main board.
(Read more: Nintendo CEO:'We are to blame' for poor Wii U sales)
Chris Morris | CNBC
If it were to finish the day at that last traded price, it would mark its worst one-day decline since July 2011, wiping off about $2.3 billion from Nintendo's market capitalization.
Nintendo now expects an operating loss of 35 billion yen ($335.7 million), compared with an initial forecast for a 100 billion yen profit.
The weak Wii U sales stand in sharp contrast to those of its predecessor, Wii, which propelled Nintendo shares to a record high of 73,200 yen in November 2007. The stock has lost more than 80 percent since then.
The latest warning comes just three months after Nintendo reiterated its sales projections for the Wii U, counting on the console to revive its fortunes as Microsoft Corp released its new XBox One and Sony Corp launched its PlayStation 4.
Nintendo also cut its sales forecast for its handheld 3DS to 13.5 million units from 18 million. It now forecast a full-year dividend of 100 yen, down from a previous estimate of 260 yen.
The Japanese game maker is to hold a management strategy presentation on January 30.
Some market participants thought the stock could go lower.
"You would have expected them to go down more and stayed down," said a hedge fund manager.
"Some people are buying on expectations (that Nintendo will change its strategy) … but the chance of a change in the short-term is still very low," he said, adding that he would be interested in the stock if it fell below 10,000 yen.