Jefferies Sees Strategy Stumble At Nintendo

Nintendo Co.'s NTDOY business is in bad shape and getting worse, an analyst said Friday.

Jefferies' Atul Goyal said the game company's failure so far to embrace smartphones leaves it high and dry.

The company's shares have bottomed out, down about 16 percent since December, according to Goyal, who figures they won't drop much more.

Goyal upgraded the game company to Hold, from Underperform, and maintained a target price of $12.70.

"But it lacks a catalyst for a sustained upside," Goyal said.

Launching a version of its famed Mario game for smartphones could change the company's fortunes, but Goyal said that's not happening.

"When Nintendo actually changes its strategy, the upside could be large," Goyal said.

But in the mean time, recent gains in margin stemming from favorable foreign exchange rates and an inventory draw-down "are unsustainable," according to Goyal.

Moreover, an "imminent decline" in global 3DS software sales will become a major headwind for Nintendo starting next year, Goyal said.

Nintendo's American depositary receipts changed hands recently at $12.85, up 0.55 percent.