EUR 850.00 For Business Accounts Only

Morningstar | Introduction of Portable Switch Will Enable Longer Platform Lifetime; Nintendo’s Shares Undervalued. See Updated Analyst Note from 30 May 2019

After meeting with the company and reviewing our forecasts, we retain Nintendo’s fair value estimate of JPY 49,000. While Nintendo’s share price has surged approximately 30% in 2019, we view that Switch’s lifecycle will be longer than the market’s expectation, and therefore believe the current share price is undervalued. Typically, Nintendo’s home console shipment had hit the peak in its second or third year, and the shipment tends to slowdown thereafter. However, we expect 18 million Switch shipments in its fourth fiscal year, which is larger than 17 million in the previous year, and believe that Switch’s lifetime will be much longer, as a new portable version of Switch is expected to be introduced this year. As a result, we forecast that Switch’s lifetime shipment will be 100 million consoles, which is as same as Wii’s 101 million, and much larger than Wii U’s 13 million, Game Cube’s 22 million, and Nintendo 64’s 33 million.

There are two major reasons we believe that the introduction of a portable version will succeed. Firstly, we assume the portable Switch will be more affordable, and thus it will enable Nintendo to sell more than one console per household, so that users can enjoy playing games such as Super Mario Party, Super Smash Bros. Ultimate, and Splatoon 2 with family. Secondly, Nintendo can leverage its resources more effectively. Nintendo has been managing home and portable consoles separately, and developing different games for each console. The introduction of portable Switch means that Nintendo will integrate two consoles into one, so that Nintendo can launch killer titles more frequently to one platform. For instance, Pokemon series has been sold on Nintendo’s portable consoles over the past 20 years, but the next title will be sold on Switch, which should contribute boosting Switch hardware sales.