Analysts Hesitant To Pick Up Nintendo As Hardware Sales Slow

Nintendo NTDOY exceeded expectations in third-quarter revenue, earnings per share and Switch sales. But one analyst team still isn’t sold on the gamer life.

The Rating

Wedbush analysts Nick McKay and Michael Pachter maintained a Neutral rating on Nintendo and cut their price target from ¥43,500 to ¥34,000.

The Thesis

By most accounts, Nintendo seemed to boast a successful quarter. Mix shift and top-line upside bolstered the bottom line.

“Switch software sales accounted for the vast majority of the top-line upside relative to our estimate, as Super Smash Bros. Ultimate, the two Pokémon games, and Super Mario Party sold-in 12.08 million units, 10 million units, and 5.3 million units in their launch quarter,” Wedbush wrote in a note.

But the analysts were disappointed in outlook for Switch shipments, which negated positive holiday results. Nintendo cut its guidance from 20 million to 17 million units, and Wedbush expects similar projections for 2020.

“We expect demand to trend lower thereafter, meaning that the Switch will not ever come close to the Wii’s lifetime installed base of over 100 million units,” McKay and Pachter wrote.

They also read a slow in 3DS sales to mean the device is nearing the end of its run.

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