Nintendo Earnings: Super Mario Movie Contributes New Switch Users; Fair Value Estimate Up 10%

While wide-moat Nintendo’s operating income in the December quarter was in line with our expectations, we lift our fair value estimate to JPY 7,700 from JPY 7,000 as we have raised our console and game shipment assumptions. According to management, a relatively large number of new users purchased Switch consoles during this holiday season, which we believe is unusual for a platform in its seventh year. We believe that Nintendo is succeeding in expanding its user base as a result of its long-standing efforts to increase the population of those who are familiar with Nintendo’s characters, such as the release of The Super Mario Bros. Movie in April 2023. In fact, management commented that the areas where the movie was released are larger than the areas where Nintendo operates its game console business, and thus, the movie provided Nintendo with an opportunity to strengthen sales channels in Latin America and Southeast Asia.