Nintendo NX Going To Launch In October
Nintendo (7974.Japan/NTDOY) slipped 5% in Tokyo after Nomura Securities said the mysterious new console NX, to be unveiled this June, will cannibalize the existing sales of 3DS and Wii U.
According to analyst Junko Yamamura, Nintendo will make NX available by 2016 year-end’s shopping season. Nomura expects Nintendo to announce the “concept” sometime between March and May, unveil the actual console in June, and launch it between October and November. “We think the NX will start to boost operating profits in 18/3, when it will have been on the market for a full year and will have a line-up of software titles, which carry high operating margins.”
But NX will cut into sales of 3DS and Wii U, said Nomura:
We had previously thought that the NX launch would have only a limited impact on 3DS and Wii U sales as it is not being positioned as a successor to either console, but we have now altered our view because 3DS sales have been weakening a little recently, particularly in terms of software, as the machine enters its sixth year, and to factor in a harsher competitive climate and what happened to other existing consoles when new machines were launched in the past.
We still expect the NX to launch in 17/3. We have lowered our estimates for current consoles to reflect the present situation, fiercer competition, and what has happened in the past when new hardware is announced… We have reduced our operating profit forecasts for 16/3 by 5.7% and for 17/3–21/3 by 30.0–32.7%.
Nomura reduced its price target by 21% from 21,900 yen to 17,300. Nintendo was trading at 15,610 this morning. The bank’s target implies 15 times their forward earnings estimate.
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