Nintendo Switch has already become the fastest-selling system in the Nintendo’s history, early success that has seen the company’s share price climb 20.74 percent since launch. But, analysts believe there is a reason for shareholders to be even more excited.
Morgan Stanley research analyst Masahiro Ono believes that Nintendo Switch has the potential to become as successful as the Wii, projecting that the console will sell 54 million units worldwide by 2021. That estimates 8.7 million consoles sold in 2018, 18 million in 2020 and then that sales will decline in 2021 to 12.5 million.
“The Switch is proving to be very competitive, and we anticipate strong sales for core game titles, boosting our conviction in OP growth through F3/20. Near term, we think the stock will rise as sales trends for likely hit titles are factored in,” Ono wrote in a note circulated to clients.
“As a home console, shipments would likely fall short of the Wii, but given that Switch users are less likely to be light users vs. the Wii base, we expect a higher tie ratio and profitability.”
The “higher tie ratio” relates to the number of games that will be sold per console, which, while Ono is uncertain whether Nintendo Switch can rival Wii in unit sales, he believes that it will be more profitable as there will be more ways for consumers to buy games.
He adds: “Since the March 3 Switch launch, Nintendo has outperformed TOPIX, but probably not beyond the point where pre-launch expectations are priced in; we doubt the success/failure of the real game console cycle is properly reflected. Furthermore, we expect the Switch tie ratio will be higher than in the Wii period. If our analysis is correct, software profit contributions should exceed the profit effects of increased hardware shipments, which we think is insufficiently priced into the stock.”
