Nintendo Earnings: Zelda Movie Development Is Positive Long Term to Increase Fan Base for Characters

Although Nintendo’s September-quarter revenue and operating income were below our expectations due to the lower shipments of first-party games, we are not changing our fair value estimate for Nintendo of JPY 7,000, as total game and console shipment numbers were largely in line with our forecasts. While the quarter lacked strong title launches that directly impact Nintendo’s earnings, the announcement of the development of a live-action film of The Legend of Zelda was a highlight. The Legend of Zelda is one of Nintendo’s most iconic IPs, with the first game released in 1986, and the latest game, The Legend of Zelda: Tears of the Kingdom, having shipped 19.5 million units since its launch in May. Although the movie is not expected to be released for several years and will not have a direct impact on Nintendo’s earnings, we expect it to play a role in expanding the fan base of Nintendo’s characters in the long run, as did the Super Mario Bros. Movie released earlier this year. We view Nintendo’s shares as fairly valued.