- Nintendo first-party titles give the Japanese video player an important advantage over its global competitors like PlayStation 4 and Xbox One.
- Switch demand will be heavily offset
- Morgan Stanley argued that Switch sales will lift Nintendo's share price from a longer cycle.
Switch sales will increase as Nintendo rolls out its new Pocket Monsters Smash Brothers game in front of the holiday season, according to Morgan Stanley.
These first-party titles exclusively for Nintendo consoles give the Japanese game maker an important advantage – a strong price force – over its global competition like PlayStation4 and Xbox One, and will help to lift Nintendo shares in the long run, Morgan wrote Stanley analysts Masahiro Ono and Yui Yasumoto in a note sent to clients on Monday.
"Margins on first-party software are high, as these margins are controlled by digital downloads, we believe that the validity of valuation comparisons with powerful US publishers is stronger in the case of Nintendo than for consoles such as Sony," said the two analysts from Morgan Stanley.
They see the last 37,232 share price of about 4.8 billion, saying that stocks could hit 51,000 kroner (R6,600) – 38% over where stocks were trading on Tuesday.
Ono and Yasumoto stated that the switch has a longer life cycle than the company's Wii generation, but will match Wii's highest annual sales because they see an effective "one person, one console" penetration strategy that brings 3DS user relocation to Switch and Switch online popularity among younger users.
"The Switch strategy is radically different from the Wii generation – sold together with Will Sports in Europe and the United States, and dropped the demand of adult users – making it difficult to appeal to children with a console price of $ 300 (R4,300) in the off season, and we expected that Switch demand to be particularly heavy in the October-December holidays, "they said, pointing out that the current thread in Switch sales will not have a major impact on Nintendo's share price.
Morgan Stanley is not the only Wall Street firm to be bullish on the Japanese video player. Of the 23 analysts who show coverage on Bloomberg, 20 have a "buy" rating and only three have a "sell".
Atul Goyal in Jefferies, which has a price target of 65,100 kroner, considers stocks
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