Longtime Nintendo Bull Slashes Target, Says Switch Has Peaked

(Bloomberg) -- One of Nintendo Co.’s longest-running bulls has ended a four-year recommendation to buy the stock and cut his share price target by 44 percent on concerns earnings from the Switch console have peaked.

Hirotoshi Murakami, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., lowered his rating to neutral on Friday, ending the overweight call he’d had in place since November 2014. The 12-month share forecast was cut to 26,400 yen, which is 9.8 percent below the closing price, compared with 47,000 yen earlier.

While Murakami argued as recently as December that the Switch was poised for more growth, that changed after the company last week cut its outlook for shipments and reported a sharp drop in profit from its 3DS handheld gaming device.

“We think the shares priced in the earnings peak in 2018 and are headed for a post-peak phase,” Murakami wrote in Friday’s report.

The downgrade is another blow for the game maker, whose shares tumbled by 29 percent last year on concerns that the Switch -- which can be played at home or on-the-go -- was cannibalizing sales of its handheld 3DS device. The company last week said shipments in the fiscal year ending March would be 17 million units, down from a previous forecast of 20 million. Nintendo has also delayed two key games, worrying investors.

While Murakami is now the fourth analyst tracked by Bloomberg to have a neutral rating on the stock, there are still 18 who recommend buying the Kyoto-based company’s shares. There are no sell calls. An investor who followed his recommendation on the stock would have a one-year return of negative 34 percent.

His new target price of 26,400 yen is the lowest among all analysts, who on average see shares rising to 47,235 yen.

To contact the reporter on this story: Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson

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