Nintendo Earnings: New Zelda Game and Super Mario Bros. Movie Support Solid Switch Shipments

We maintain Nintendo’s 7974 fair value estimate of JPY 6,000 as its full-year guidance for fiscal 2023 (ending March 2024) is largely in line with our expectations. Although Nintendo guides to 9.5% revenue decline and 10.8% operating income decline for the new fiscal year due to the slowdown in Switch shipments, it is noteworthy that the Switch still maintains a high level of shipments and more than 100 million active users, even as it enters its seventh year after the launch. We believe that Nintendo’s shares are currently fairly valued. While a solid user base and game sales will support Nintendo’s profitability, the Switch is nearing the end of its cycle and the shares lack catalysts until the new console arrives. How Nintendo successfully moves its massive user base smoothly to the next-generation console will be the challenge.

Nintendo guides to 15 million console shipments (down 16.5% year over year) and 180 million game shipments (down 15.9% year over year) for the new fiscal year. While the game shipment guidance is in line with our expectations, the console shipment assumption seems somewhat challenging as the company expects some positive impacts—such as the new Zelda game and the Super Mario movie—to boost the shipments. We maintain our console and game shipment forecasts of 14 million and 180 million, respectively, but this difference does not have a material impact on Nintendo’s profits, given the thin margin for consoles.