Nintendo Earnings: New Console Coming Soon, Expect Solid Launch; Fair Value Up 4% to JPY 8,000

Nintendo’s operating income guidance for fiscal 2024 (ending March 2025) is JPY 400 billion, down 24.4% year on year, which is below our expectations as it does not include the contribution from the new console. Moreover, the company’s target of shipping 13.5 million Switch consoles in the new fiscal year, down 14% year on year, seems stretched, given the weak pipeline and the more than 20% decline in Switch console shipments in the second half of fiscal 2023. At the same time, Nintendo’s comment that it will make more announcements about the new console this fiscal year may lead people to decide to wait another year for the launch of the new console, even dragging down Switch shipments in the current fiscal year. As a result, if the new console is not launched, it would be difficult for the company to achieve this year’s operating income guidance. However, we maintain our medium-term view that Nintendo will continue to gradually expand its user base on the new platform by leveraging its attractive characters, which is the source of our wide moat rating. Our fair value estimate for Nintendo is revised to JPY 8,000 per share from JPY 7,700 previously and we believe that the shares are currently fairly valued.