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Nintendo stock forecast: What’s next for Pokemon Go maker?

By Mensholong Lepcha

Edited by Alexandra Pankratyeva

15:07, 8 February 2022

Honolulu - September 7, 2018: Nintendo Red and White Logo inside Best Buy store. Nintendo Co., Ltd. is a Japanese multinational consumer electronics and video game company headquartered in Kyoto.
Nintendo stock forecast: What’s next for Pokemon Go maker? – Photo: Shutterstock

The gaming industry has been going through a hot streak during the pandemic era. Stay-at-home restrictions and the emergence of blockchain play-to-earn gaming in an increasingly digitalised world has helped boost games companies’ stock.

However, a global semiconductor supply crunch continues to cripple the manufacturing capabilities of leading video game console makers like Sony (6758), Microsoft (MSFT) and Nintendo (7974). As a result, the demand for next-generation consoles – Sony’s Playstation 5 (PS5), Microsoft’s Xbox Series S/Series X and Nintendo’s Switch OLED – currently outweighs the supply.

This article discusses how the Nintendo stock value is faring amid semiconductor shortages and sector-wide mergers and acquisition consolidation. We will also discuss the latest news and financial results to help you build a plausible Nintendo share price forecast for 2022 and beyond.

Nintendo stock news: Semiconductor shortage hampers gaming sector growth

On 3 February, Nintendo reported a 21.4% year-on-year drop in sales of its flagship Switch Series gaming console for the nine months ended 31 December 2021.

Shareholders were likely concerned after the Japanese firm downgraded its Nintendo Switch hardware sales forecast by 1 million units for the full year ended 31 March 2022 due to the “impact of the shortage in semiconductor components on production.”

“Since the start of this fiscal year, we have continually said that semiconductor components are in short supply and the future is uncertain. There has not been a major improvement in the situation so far, which is why we do not think we can produce hardware in the quantities we initially expected,” Nintendo president Furukawa said in November.

Console-maker Sony made a similar statement when it revised PS5 unit sales for the 2021 financial year, saying:

“Unfortunately, due to limitations on the supply of components, especially semiconductors, and an increase in delivery times resulting from disruption of the global distribution supply chain, we have revised our FY21 unit sales forecast for PS5 hardware to 11.5 million units.”

“Limitations on the supply of components are expected to continue going forward, but we are continuing to exert every effort to meet the strong demand for PS5,” Sony added.

There is enormous demand for the new gaming consoles, but manufacturers cannot fulfil orders right now. 

“Sony and Microsoft had a really tough time keeping their new consoles in stock last year (2021). That was down to really strong demand from consumers, but also from the pressure on the availability of components, which means they weren’t able to bring in the amount of devices that they needed to into the market,” said Piers Harding-Rolls, research analyst at Ampere Analysis. 

Harding-Rolls expects conditions to improve in 2022, saying:

“It looks like the availability of Playstation 5 and Xbox series consoles is going to improve slowly over the year and our expectation is that Sony will outsell Microsoft two-to-one, but actually the biggest selling console in the market is going to be Nintendo Switch at 21 million units and that will be driven by demand for the new Nintendo Switch OLED.”

Nintendo share analysis: Focus on mobile amid sector-wide consolidation

Following the pandemic-induced global market crash in March 2020, Nintendo stock value doubled its share price over the next nine months. It largely managed to retain those gains from February to June 2021, but the share price fell sharply in July and again at the end of September. 

At the time of writing, on 7 February 2022, Nintendo’s Tokyo-listed primary stock is trading at JPY58,490 ($507.08), more than 16% below its 52-week high of JPY69,830, which it hit in February 2021.

Nintendo stock (7974) five-year performance

Meanwhile, the Nintendo stock price in USD (NTDOY) is currently at about $63 for its American depositary shares (ADS), 23% below its 52-week high of $82 for Nintendo ADS.

Over the past year, Nintendo shares have underperformed compared to gaming console rivals Sony and Microsoft. While Sony and Microsoft have gained about 5% and over 26%, respectively, Nintendo has lost nearly 8% in the past year.

Over a more extended period of five years, the companies’ performance looked stronger, with Microsoft gaining 377%, Sony gaining 244% and Nintendo – 143%.

Nintendo (NTDOY) vs Sony vs Microsoft five-year performance

Sony and Microsoft have also made headlines recently with their multi-billion dollar acquisitions, with the former buying Halo developer Bungie for $3.6bn and the latter acquiring Candy Crush maker Activision Blizzard for $68.7bn.

In contrast, Nintendo is not expected to join the gaming sector mergers and acquisitions frenzy. In an interview with Nikkei, Nintendo’s new president Shuntaro Furukawa said the company would spend up to JPY100bn on in-house game development with a focus on smartphone gaming, inspired by the success of the hit mobile augmented-reality game Pokemon Go.

“We started talking about expanding the number of people who have access to Nintendo IP (intellectual property) over five years ago. The first major challenge was to determine how to go about our mobile business. We explored various possibilities, such as whether to make games for mobile platforms and whether to implement things that are only possible on mobile. Through this process, we came to recognise that there is a massive number of people around the world that we cannot reach through dedicated video game systems alone,” said Shigeru Miyamoto, director at Nintendo, in November 2021.

“On mobile, Nintendo has been very silent since Mario Kart Tour’s launch in 2019, but I think 2022 is when we will see an established IP arriving on smart devices again,” said Dr Serkan Toto, CEO of Tokyo-based game industry consultancy Kantan Games. 

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Atul Goyal and Shingo Ito of investment firm Jefferies said Nintendo’s failure to participate in the sector-wide consolidation could represent a long-term risk. 

“Nintendo has the most powerful IP portfolio in the game industry in our view. But we are not convinced that it is ready to monetise its IP outside its own hardware,” they added.

Nintendo fundamental analysis: Latest earnings

Nintendo, which began in 1889 by selling Hanafuda playing cards in Japan, reported mixed nine-month earnings results on 3 February as net sales and profit fell during the period, but the company raised its guidance for the full year.

The company reported a 6% year-on-year drop in net sales for the first nine months of the full year ended 31 March 2022. Nine months net profit fell 2.5%, the company said.

The net profit ratio for the period stood at 27.8% compared to 26.8% a year ago.

According to the company, most of its sales came from the Americas region, which accounted for over 42%, while Japan and Europe contributed 21% and 26.5%, respectively.

Despite the fall in hardware sales, Nintendo raised its full-year net sales and net profit forecast by 3.1% and 14.3%, respectively, due to higher foreign currency exchange rate, strong demand for its Switch gaming consoles and the launch of new gaming titles.

The company also raised its annual dividend forecast to JPY1,700 per share from the previously announced JPY1,490.

The Pokemon series video game developer also raised its full-year software unit sales forecast by 10% to 220 million units. Its latest games, Pokemon Legends: Arceus and Kirby and the Forgotten Land, will be released in the March quarter.

“By maximising our software sales as much as possible, we aim to maintain the momentum of the Nintendo Switch business,” Furukawa said.

Nintendo stock predictions: Analyst sentiment

Analysts at Jefferies were concerned about Nintendo’s future earnings due to its Switch family gaming console entering its sixth financial year since its release and Nintendo’s reluctance to pursue inorganic growth.

“Overall, we believe this is no longer an earnings growth story. We would have liked to see Nintendo start building a beyond-console strategy, but that now looks unlikely. Switch is a console in its fifth calendar year (sixth fiscal year) and the company's main earnings driver. To get beyond the cyclical nature of console-dependent earnings, in our view, Nintendo needs to start building a beyond-console strategy,” said Jefferies in a note published after Nintendo published its latest earnings on 3 February.

“We'd reassess our view were Nintendo to show an intent to build/grow its gaming business beyond its 'hardware' focus,” Jefferies added.

Jefferies tagged Nintendo an “underperform” stock and set a price target of JPY43,900 for its Tokyo-listed primary shares. This represents a downside of nearly 25% compared to 7 February’s closing price of JPY58,490. 

Nintendo stock price target for its US-listed ADS was set at $50 by Jefferies, representing a downside of over 20% compared to the current price of $63.02.

Meanwhile, research firm Morningstar set a fair value estimate of JPY60,000 for Nintendo stock in its latest report on the company from November 2021, representing an upside of about 2.5% on the latest closing price.

“Future challenges for the company will be: 1) Whether the company can monetise its characters efficiently on non-console business, 2) Whether re-entry to the greater China market will succeed, and 3) How the company can adapt to the diffusion of the cloud gaming platform. We nevertheless believe the company’s ability to deliver fun games through its characters is intact,” said Morningstar.

Nintendo stock forecast: Targets for 2022, 2025 and 2027

According to analyst sentiment data compiled by The Wall Street Journal (WSJ), the consensus recommendation for Nintendo stock was a Buy as of 7 February 2022. Of the 19 analysts covering the stock, 12 rated it a Buy, four advised investors to Hold, and the remaining three believed it to be a Sell.

The WSJ’s data showed that the Nintendo stock price target consensus stood at JPY67,517.65, representing a potential upside of over 15% on the 7 February price of JPY58,490. The highest price target was set at JPY99,000, while the lowest was JPY28,400.

Nintendo stock analyst ratings

Meanwhile, the Nintendo share price forecast for the Japanese-listed stock from Wallet Investor on 7 February suggested its price will rise to about JPY63,726 by the end of 2022. It expected the Nintendo share future price to increase to JPY70,616 by the end of 2023 and JPY84,582 by the end of 2025. Although the service did not provide targets for 2030, its five-year stock forecast expected Nintendo to hit JPY91,655 in January 2027.

According to Gov Capital’s algorithm-based Nintendo (NTDOY) stock forecast, the Nintendo stock price in USD could rise by more than 67% in a year to $105.44. The service expected the US-listed stock to trade at $78.518 by the end of 2022, move up to $236.203 by the end of 2025, and hit $337.57 in February 2027.

When looking for Nintendo stock projections, it’s crucial to bear in mind that analysts’ forecasts are often wrong. Predictions are based on fundamental analysis and technical studies of Nintendo stock’s historical price pattern, and past performance does not guarantee future results.

You should do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest funds that you cannot afford to lose.

FAQs

Is Nintendo a good stock to buy?

That depends on your own investment objectives and the research you’ve carried out on the stock. Remember, it’s vital to form your own opinion of a company’s prospects and its likelihood of achieving analysts’ targets.

Why has the Nintendo stock price been going down?

A global semiconductor supply shortage continues dragging down the manufacturing capabilities of leading video game console makers, including Nintendo. As a result, Nintendo downgraded its hardware sales forecast by one million units for the full year ended 31 March 2022. Over the past year, Nintendo shares have underperformed its gaming console rivals, Sony and Microsoft.

Is Nintendo stock a Buy, Sell or Hold?

According to analyst data compiled by the Wall Street Journal, the consensus recommendation for Nintendo stock was Buy as of 7 February 2022.

Will Nintendo stock go up or down?

Many factors dictate whether a company’s stock price rises or falls. Some of these are dependent on the company’s performance, while others are affected by broader macro-economic factors. You need to remember that there are no guarantees as markets are volatile.

Where is Nintendo stock traded?

Nintendo’s stock has a primary listing on the Tokyo stock exchange under the ticker symbol 7974. Nintendo’s stock is also traded in USD as American depositary shares (ADS) under the ticker symbol NTDOY.

Markets in this article

MSFT
Microsoft Corp (Extended Hours)
437.55 USD
-3.84 -0.870%
7974
Nintendo Co., Ltd.
8603.5 USD
18.6 +0.220%
SNE
Sony
92.89 USD
-0.19 -0.200%

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