Expecting NX console disappointment, Macquarie cuts Nintendo to Neutral

• Running against a general recent bullish tide, Macquarie has downgraded Nintendo (OTCPK:NTDOY) to Neutral, from its previous Outperform rating.
• A long-in-the-works revamp to the company's consoles -- the NX, with reveal coming next week -- is liable to come at a price that will result in a "major" disappointment for volume sales, the firm says.
• Speculation is putting the price of the new console between $300 and $350, in line with competing consoles, vs. the Wii's former discount to rival boxes from Sony and Microsoft.
• The company's move into mobile gaming, Super Mario Run, has a missed opportunity as well, Macquarie says: Being only iOS and ex-China, it's missing 60% of the market.
• The firm cut its price target on Nintendo to ¥25,900 from a previous ¥27,300, implying some fractional downside from today's closing price of ¥26,075.

Comments

[FromagePegase]

Spot On Macquarie, the stock price is now 25,900. A surge is to be expected on NX reveal day, but I am not convinced that it will take place this week.

[Chris Lau]

Downgrades like this create opportunity - that's how you find value and are alerts I pitch to [+ premium] subscribers. It makes little sense to declare game dev on iOS and NX a failure. iOS / Apple users PAY for apps. Android users want everything for free.

See GLUU as an example of what does not work.

[seanurans]

M has bad reputation to fool publics and earn by their own in my country. Don't know if the same here.

[Rebooter]

There's a reason for the emphasis on iOS. There's a reason for the high profile presence at the iPhone 7 launch event.

The math is straightforward. $15 billion buys a 30% stake in Nintendo (at a 50% premium), a company with one of the most desirable IP content portfolios this side of Disney.

$15 billion represents roughly 7% of Apple's cash horde. With virtually no impact to the balance sheet you own a significant stake in an invaluable IP catalog and, oh by the way, have an entrée into consumer gaming hardware. Which, oh by the way, dovetails nicely with development of your next generation television experience.

I would not be surprised in the slightest to see an announcement before the end of the year, possibly as early as this quarter, once both companies are outside their quiet periods.

[Ricardo Woof]

Yep. True dat. Thanks for your post. Now I have these lyrics playing in my head: "Maybe I'm a dreamer, but I'm not the only one..."

http://bit.ly/2efSGNE

As with all things, time will tell...

Thanks

RW

[Jason Aycock]

Hi all:
I can't provide the report.
They are expecting the *reveal* next week, not console availability -- it would be a major shock if a console came next week without any leak from Nintendo :) but I have added the word reveal above to help clarify. A reveal ahead of Oct. 26 earnings makes some sense as daxrulez notes.
As for "Super Mario Run," my understanding is it will launch on Android "someday." Getting back on subject, if Macquarie believes the limited launch is a negative then whether you agree or not, that's a fair take to make, and critique.

[Dafne Preston]

But they just expect a reveal next week cause this makes sense, so this is all speculation... the really don't seem to know anything solid and confirmed...

[daxrulez]

Sigh. They might be lucky and get it right (because, yes, I'm 100% positive they actually don't know anything) because the earning meeting is coming up at the end of the october and so NX might be revealed before.
That said, I certainly wouldn't trust someone who downgrades an outlook and then says "The company's move into mobile gaming, Super Mario Run, has a missed opportunity as well, Macquarie says: Being only iOS and ex-China, it's missing 60% of the market." without even realizing that yes, the game WILL also be released on Android!

[Dafne Preston]

-- the NX, coming next week --

Jason Aycock, i ask you politely; are you saying that the next week we will have official Nintendo NX news by Nintendo itself? i assume you can't reveal your sources.

I'll be extremely grateful if you answer me.

[Tales From The Future]

The actual RELEASE date still is March 2017 (or by March 2017):

"In April 2016, Nintendo announced the release date for the upcoming new NX games console (still a codename) as March 2017."

We will get a REVEAL later in 2016, however I haven't seen a firm date yet.

Remember from an investor standpoint that sales of the 3DS and Wii U will further plummet once more NX news/detsils are out. Therefore Nintendo will likely wait as long as possible in 2016....

[Dafne Preston]

Yes, i know all this information, but i must insist; which are Jason Aycock sources?, how he knows that the Nintendo NX will be revealed next week?, is he just speculating about the date, or he really knows the date and he's sure about it?

[flat baroque]

There will not be a public reveal next week but there will be a significant unauthorized leak the week after....

[Jeff Russell]

Nintendo said Mario run is coming to android so get your facts straight. As a gamer, $300 is perfect price point for NX to sit next to my PS4.

[Kevin Harvell]

agreed, especially if it's portable, too!

[Jason Aycock]

Those are Macquarie's words and I believe they are focused on the launch of the game.
We had details of that back when it was announced: http://seekingalpha.co...

[Ricardo Woof]

Is there any way we can see the text of the Macquarie report, particularly if it contains inaccuracies -- as at least seems to be suggested in posts above?

Thanks.

Also, if inaccuracies are present, would be a good idea for Macquarie to correct them.