Moffett Nathanson initiated shares of Nintendo (NTDOY (OTC: NTDOY )) with a Buy rating and JPY8,250 price target in a note to clients Wednesday.
Analysts said the company "struck a near pitch-perfect note" with the introduction of its Switch product in 2017, capturing clear competitive white space and differentiation.
However, they believe that with the Switch now in its 8th fiscal year, it "is surely preparing its swan song."
"A record 130M+ units sold create one hell of a difficult act to follow. But Nintendo's been here before," the analysts wrote. "A dozen years ago, it dropped the ball with the Wii U, the successor to the legendary Wii console. The stock suffered mightily."
"For a variety of reasons, we think this time is different. A smoother transition and more sustainable level of profits ought to mean an expanding valuation multiple for one of the video game world's best businesses," they added.
If Nintendo can execute a smooth transition and maintain much of the audience from the Switch generation, analysts believe its operating profit levels should stabilize quickly and then grow.
"Soon, perhaps as early as 1H 2024, we expect an announcement from Nintendo on 'what comes next.' As uncertainly around the hardware strategy fades, we'd expect multiple expansion to take hold, given the obvious quality of Nintendo's business and increasing demonstration of earnings stability," said the analysts.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.