One of the biggest Nintendo bull's on Wall Street says shares could soar 80% even if Switch sales are flat




 

AP/Koji Sasahara


Jefferies, one of the biggest Nintendo bulls on Wall Street, says shares of the Japanese game maker could soar 80% - even if Switch sales are flat.

"We like Nintendo as, we believe, it offers the best earnings growth at the cheapest valuations in the sector," Atul Goyal and his colleague Chengyao Zhang, analysts from Jefferies, said in a note sent out to clients on Monday.

Even with a conservative estimate for flat Switch sales, the duo says operating profits could triple in three years. "In 1Q, operating profits grew c. 90% year over year despite no major game launches and no hardware growth," they said. "We believe Switch hardware sales can grow c.10-12% year over year for the next 3-4 years."

They added: "We conservatively assume that hardware will not grow, yet growing installed base is set to ensure software sales growth and, hence, profit growth.We expect more bundled software this year and a price cut as well as new variants next year."

The Jefferies analysts also believe digital downloads, digital-in-game-spending, and digital subscriptions should see margin expansion as mobile-game Dragalia Lost, Switch Online, and 1P Switch games will soon be launched and enter the Chinese market.

Goyal and Zhang maintained a "buy" rating and raised their target price to ¥65,100 - 80% above where shares are currently trading.

In late July, Nintendo reported first-quarter sales of 168.2 billion yen and a net profit of 30.6 billion yen ($274.9 million), beating Wall Street expectations.

Nintendo shares were down 11% this year.

Markets Insider

NOW WATCH: How a black cop infiltrated the KKK - the true story behind Spike Lee's 'BlacKkKlansman'

See Also:

COMMENTS

More Related News

Sony
Sony's PlayStation group will no longer compete with Nintendo over handheld game consoles

Sony's PlayStation group has a major hit on its hands with the PlayStation 4. On the flipside, Sony's handheld gaming console - the PlayStation Vita - has faded into history. The end of Vita production in 2019 will mark Sony's exit from the portable gaming market.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.