Morningstar | Strong Game Titles Will Reignite Switch Shipment Momentum this Winter; Nintendo Shares Undervalued
Switch console shipment recorded 1.88 million in the June quarter, which was below the previous year of 1.97 million and our expectation of 2.2 million. However, we believe that the stagnation is already embedded in the current Nintendo share price, since it had dropped approximately 25% from its peak in January. As discussed on our previous note, we view that lack of new big titles in the June quarter was the reason for the lull, and shipment of Nintendo Labo, which was expected to deliver a new user experience, was below the company's expectation. On the other hand, we will maintain our view that game titles launched this winter are strong enough to reignite Switch's shipment momentum, and believe that the company can achieve its target to sell 20 million consoles within this fiscal year. We thus will retain our fair value estimate of JPY 51,000 as well as our no-moat rating.Despite a lack of new big titles, we are encouraged with the decent software sales. Around 18 million Switch games were sold in the June quarter, which lifts the entire tie ratio (number of games shipped per hardware) to 4.4 from 3.9, suggesting the improving engagement of existing users. Therefore, we are confident that Switch's game shipment will exceed Nintendo's guidance of 100 million, as we assess that the launch of Super Mario Party in October, Pokemon Pikachu/Eevee in November, and Super Smash Bros Ultimate in December will be quite attractive.
The number of games launched on Switch platform is still much lower than that of Wii on the corresponding period, as we assume that some third-party publishers had been reluctant to join in, being skeptical about the success of Switch. As Switch has been establishing an attractive user base, we forecast that more publishers will decide to provide games on the Switch platform, which should give traction to Switch's shipment momentum in the near future.
Nintendo is mainly engaged in the development, manufacture, and sale of home-use game hardware/software and peripheral equipment as well as software under the name of "Nintendo DS," "Nintendo 3DS," "Game Boy," "Nintendo 64,"" Game Boy Advance," "Wii," "Nintendo GameCube," "Game Boy Color" and "e-Reader (trading card games)." Co.'s principal software trademarks include "Pokemon," "Super Mario Bros.," "The Legend of Zelda," "STARFOX64" and others. Co. also provides online games and repair services. In addition, Co. is involved in the manufacture and sale of Japanese playing cards called "Karuta," playing cards and board games, as well as the management of intellectual property rights.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.