Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) Earnings Could Rise Due to Switch and Mobile


Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) shares have already been up over 70% over a one year period recently, and it could continue to rise due to the potential earnings growth, which may be fueled by the demand for its innovative and popular Switch gaming console.


If you haven’t heard of or played with a Nintendo console before, the company manufactures and markets home-use video games. The company also produces related software used in conjunction with its television-compatible entertainment systems. Nintendo diversifies its business by seeking to offer new applications of video game systems, such as e-mail boxes and DVDs.


Now, there were a slew of analyst comments recently, that could be indicating the stock may beat its earnings estimates. Consequently, when it releases its earnings results soon, Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) could rise if it’s able to beat its earning estimates and guide its revenues and earnings higher.


That in mind, let’s delve into what some analysts said about NTDOY, and why the stock could rise. According to Jefferies analyst Atul Goyal, who is bullish on Nintendo, “it is indeed quite impressive; demand is quite strong and the product is sold out almost everywhere. This reminds us of the Wii launch days. Switch is ‘sold out’ at most retailers and showing rare signs of a potentially big success. This stands in stark contrast to the stock taking a beating of c.12-15% twice…when Nintendo provided details of Switch. The market had already concluded that Switch has failed, but it is turning out to be quite the opposite.”

Goyal continued, “We believe for FY3/18 guidance…Nintendo’s guidance of Switch volumes and OP numbers could very well underwhelm the market. There is a small probability that Nintendo forecasts 10-12m unit shipment for FY3/18 but that probability is not high. However, as the below table will make it clear – that when Nintendo forecasts a certain volume for its products, it doesn’t mean that is the maximum capacity. In reality, Nintendo would adjust its capacity and supply chain during the course of the year.”


Not only that, there are some traders who may be signaling that Nintendo’s Switch console could be bigger than Wii, which was Nintendo’s best-selling console of all time. Traders may be pricing this in, which may have caused the stock to outperform the broader Japanese stock market by around 20% recently. Consequently, if Nintendo’s results top Wall Street estimates, this stock could continue its recent run.


Going back to Jefferies analyst Goyal’s note, the analyst reiterated his buy rating and $43 price target on Nintendo, which would indicate a price target over 40% above its recent share price.


Goyal also noted, “Nintendo’s real value lies not in its hardware devices, but in its game development and IP. The largest potential monetization of Nintendo IP (a la Pokemon Go) can be mainly done on mobile-platform. And this we believe provides a structural growth backdrop for Nintendo’s earnings. But there is a sizable portion of the user base that loves to play Nintendo games on a desirable platform. Switch is certainly unique and fun. With the help of its strong game pipeline and with mobile-games, we believe Nintendo will generate strong software sales to its core-user base.”
That said, you might want to stay up to date on Nintendo to see how it performs after its earnings release. There are some bullish analysts covering the stock, and if other analysts start to release positive notes on the stock, NTDOY could rise. To stay up to date on NTDOY, all you have to do is enter your email address in the box below, and we’ll send you updates, if any, on the game maker.