Nintendo’s biggest Wall Street bull cuts target, warns Switch slowdown

Dave
Hunt/Flickr

• Wall Street’s most bullish Nintendo analyst cuts his
  forecast for the video-game maker’s stock price.
• Previously holding a target of 71,200 yen ($640.45),
  Jefferies analyst Atul Goyal reduced his target to 64,200 yen
  ($577.48).
• He cited lower expected sales for the Nintendo Switch
  console as the key driver.
• Watch
  Nintendo trade in real time here.

Nintendo’s
biggest bull on Wall Street, Jefferies’ Atul Goyal, has slashed
his price target for the company by more than 10%, citing lower
expectations for the number of Switch consoles it will sell in
2018.

Writing on Friday, Goyal and his colleague Chengyao Zhang, said
that while they remain bullish on the Japanese console maker,
there are reasons to suspect that sales will be lower than
previously thought. This, in turn, forced Goyal to cut his price
target for the stock.

“Market expectations for Switch, as reflected in stock price,
have turned from robust growth to no-growth in a matter of three
months,” Goyal wrote to clients.

“We believe continued sales of Switch over the course of this
year and next could very well prove this current thesis of Switch
being ex- growth wrong as well,” he continued.

“But given the sustained selling pressure, perhaps the short-term
market is right about Nintendo (for a change) and perhaps it
doesn’t grow in hardware sales.”

Previously holding a target of 71,200 yen ($640.45), Goyal
reduced his target to 64,200 yen ($577.48). Nintendo’s stock is
currently at around 38,000 yen ($341.83), and would still need to
increase by roughly 69% to hit Goyal’s lower target.

Nintendo’s stock has lost more than 12% in 2018, although it has
started to recover over the past couple of months, gaining around
4% since late June, as the chart below illustrates:

Markets Insider

Regardless of the price target downgrade, Goyal is still among
the most bullish analysts on Nintendo, and maintains a strong
“buy” rating on the stock. Before Friday’s downgrade only one
analyst, Satoshi Kurihara at Tokai Tokyo Securities, had a higher
target than Goyal.

“No other company in our coverage is experiencing such growth and
trading at such low multiples,” Goyal wrote.

“Nintendo Switch has only 1 year in the bag and 4-5 years more to
go, with benefits from cycle and structural (digital) upside.
Mobile, China, Online are some other potentially large drivers.”

In April, Nintendo posted strong third-quarter results,
which caused Goyal to proclaim that it was the “cheapest
game stock in the world.”