Nintendo’s First-Party Games Recorded Strong Sales Amid Headwinds; Shares Undervalued

Nintendo’s September quarter operating income was JPY 119 billion, 19% up from the previous year and above our expectation of JPY 102 billion. While hardware shipment of 3.25 million units was below our 3.57 million forecast partly due to the components’ shortage, software shipment of 54 million units exceeded our expectation of 45 million, driven by the attractive first-party games such as Splatoon 3, which sold 7.9 million in just three weeks. We are encouraged that the game shipment in the quarter was 11.1% up from the previous year, improving from an 8.6% decline in the June quarter. While we had been concerned about the slowdown of the video game industry, Nintendo proved that it could bounce back from headwinds such as economic slowdowns with its attractive game pipeline. We will review our earnings forecasts after the earnings conference and meeting with the company, but we retain our view that Nintendo’s shares are undervalued.