June 28, 2017

MORGAN STANLEY: Nintendo's Switch is 'insufficiently priced into the stock' (NINTENDO, NTDOY)

28 April 2017, 01:14 | Marie Dunn

Nintendo of America President and COO Reggie Fils-AimeMore

Nintendo of America President and COO Reggie Fils-Aime

It all started with fantastic sales over the launch weekend at the beginning of March.

Nintendo said it expects sales to remain strong, forecasting it will sell another 10 million units over the next year. Nintendo's latest financial results show that as of the end of March it's shipped 2.74 million consoles.

Nintendo reported revenues of $4.4 billion, compared to about $4.5 billion a year ago.

By the end of 2012, the Wii U had achieved 3 million sales in six weeks. Currently, many investors are wondering whether Nintendo Switch will outpace the sales for the Wii on a long term. This means that the Switch launch has officially been a success, with it coming close to the 3.2 million Wii units that were shipped during its launch month.

The Wii U itself has not fared well, selling just 760,000 units as it ceased production, alongside software sales of 14.8 million units.

Nintendo originally estimated that they'd sell roughly 2 million units, so it's obvious that the Zelda effect played a massive part in shipping more units.

Over 2.76 million copies of The Legend of Zelda: Breadth of the Wild were sold for the new console, more than the sales of the Nintendo Switch. The 3DS already sells extremely well to children, especially with the 2DS offering, but it seems that Nintendo thinks there's still potential here.

Looking at all three consoles' first-month performances, Switch looks like it falls in the middle.

The decision comes with the 3DS posting a 7% hardware sales increase of the previous year. In Japan, 890,000 Switch games were sold, while 2.86 million were sold in The Americas and 1.71 million were sold in "Other".

That figure includes the total number of Switches sold worldwide to date over the almost eight weeks it's been available since launching on March 3, 2017.

By and large, Nintendo announced gain of 489 billion yen and an operating benefit of 29.4 billion yen for its 2016 fiscal year. Nintendo also credits Niantic's Android and iOS exclusive Pokémon Go for bolstering interest in and sales of Pokémon-related software in general.

Profit from a new console typically peaks a couple of years after launch when there is a wide choice of game titles.

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