Trump announces trade deal with EU following months of negotiations
On Friday, Citi initiated coverage on Nintendo Co Ltd (TYO:7974:JP) (OTC: NTDOY (OTC:NTDOY)) with a positive outlook, assigning a Buy rating and setting a price target of JPY14,000. The new coverage comes as Nintendo’s shares, currently trading near their 52-week high at $20.90, have been experiencing heightened volatility, amid investor concerns regarding the potential impact of the Nintendo Switch 2’s higher price point on its future sales. According to InvestingPro data, the stock has shown remarkable strength, delivering a 71% return over the past year.
Citi’s analysis suggests that despite the market’s apprehension, there are several factors likely to contribute to Nintendo’s profit growth. The launch of the Switch 2 is anticipated to be a significant growth driver. Additionally, Citi forecasts that Nintendo will introduce a more affordable version of the console, provisionally named the Switch Lite 2, which could appeal to a broader consumer base. The company’s strong financial health, rated as GOOD by InvestingPro, and impressive gross profit margin of 60% support its ability to execute on these initiatives.
The research firm also points to Nintendo’s robust software lineup as a key element in the company’s potential to increase profits. The comprehensive range of games available for Nintendo’s platforms is expected to continue to attract customers and drive software sales, which in turn can positively affect the company’s financial performance.
Citi’s commentary highlights that while equity investors are currently focused on the risks associated with the new console’s pricing, the potential for profit growth stemming from both hardware diversification and software sales has not been fully accounted for in the stock’s current valuation.
Nintendo has yet to respond to Citi’s coverage initiation and price target announcement. The company’s stock performance in the coming months will be closely watched by investors as the Switch 2’s release approaches and as market conditions evolve.
In other recent news, Nintendo has announced the suspension of preorders for its upcoming Switch 2 console in the United States due to newly imposed tariffs on Japanese imports by President Donald Trump. Although preorders were initially scheduled to begin next Wednesday, the company is reassessing its sales strategy in light of the 24% tariff. Despite this delay, Nintendo has confirmed that the Switch 2 will still launch on June 5, 2025, with a retail price of $449.99. This announcement follows the introduction of the Switch 2, which has generated significant anticipation among gaming enthusiasts. The company has also revealed that Super Mario Kart World will be one of the launch titles for the new console. Nintendo has not yet disclosed whether the tariffs will impact the final retail price or distribution strategy. The delay in preorders highlights the broader economic implications of the new trade policy on industries reliant on Japanese imports. Investors and gamers are awaiting further updates from Nintendo on how it plans to navigate these market challenges.
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