MORGAN STANLEY: Nintendo's Switch is 'insufficiently priced into the stock'
Nintendo's stock is in the middle of its best run in a decade. Shares of the video game console maker are up 61.14% in the last year at ¥27,620 ($31.65 NTDOY ADR).
A good portion of that move can be attributed to Nintendo's newest console, the red-hot Switch.
In a note circulated to clients on April 24, Morgan Stanley analyst Masahiro Ono resumed coverage of Nintendo stock with an "Overweight" rating and ¥33,000 price target, implying 18% of upside for the stock.
Ono believes the Switch is on its way to being a big hit, maybe even as big as the original Wii. Ono projects annual sales of the Switch will grow for the next three years from 8.7 million in 2018 to 18 million in 2020. Only by 2021 will sales begin to fall off, Ono said, but still to an impressive 12.5 million. In total, he sees sales of 54 million Switch units. Here's Ono:
The higher tie ratio Ono mentions refers to the number of games sold per console. While Ono isn't sure if the Switch will beat the Wii in total unit sales, Ono does think the Switch will be more profitable due to the vast array of exciting new and classic games that Switch users are expected to buy.
While the Switch has already been a major success propelling the stock 20.74% higher since the March 3 release, Ono does not think all the good news is priced into the stock just yet:
Nintendo is set to report earnings on April 27.
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(The over the counter shares that can be bought in US Dollars are represented by ticker symbol: NTDOY)
