NTDOY - Nintendo slips as Goldman Sachs downgrades on console 'lull'

Nintendo ( OTCPK:NTDOY ) is 1.5% lower in U.S. trading alongside a downgrade of the stock to Neutral at Goldman Sachs, which expects a "lull" until the videogame maker produces the follow-up to its successful Switch game console.

"Demand for the Nintendo Switch has been slowing more markedly than we had previously assumed," analyst Minami Munakata said, cutting a 2027 assumption for the company's hardware installed base to just under 163M units from a previous 173.7M units.

That means a cut of four-year operating profit estimates by 15-40% - below consensus, and "we believe that the consensus forecasts do not yet fully factor in the Nintendo Switch downcycle," Munakata said.

During hardware transitions, Nintendo's valuation multiples tend to reflect expectations for the next-gen console as consensus estimates move lower, and normalize after launch as those same forecasts rise, Munakata noted.

"However, during the transition from the Nintendo Switch, we believe that the earnings downcycle will be shallow relative to previous transitions, thanks to contributions from digital sales and Nintendo Switch Online," Munakata said.

A new target price of ¥5,000 implies about 4% downside from Nintendo's current price in Tokyo.

Citi also recently downgraded Nintendo to Neutral on the same concerns, saying that contrary to expectations, the software-hardware connection with the aging Switch "remains deep-rooted."

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