Nintendo Stock Soared During the Pandemic. It Just Got a Downgrade.

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A Nintendo Switch, to be precise.

Getty Images/Neilson Barnard

For months, rumors have circulated about a new model of the

Nintendo

‘s mobile Switch console, which is four years old. Nintendo revealed an improved Switch with a better display on Tuesday, but it wasn’t the huge next-generation product that investors had hoped for. Nintendo shares (ticker: 7974.Japan) were downgraded to Hold from Buy by Jefferies analyst Atul Goyal, citing the company’s rollout of a less-significant upgrade. With less than 8% upside to the analyst’s target price of 71,700 yen ($648.08), the analyst stated there was little justification to keep the stock’s Buy rating.

Goyal added, “This has been a widely awaited and much-discussed catalyst.” “Even though this isn’t the Switch Pro we were hoping for (and we’d already budgeted for a [fiscal 2022] launch), this third member of the Switch family should help boost interest and sales.”

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The updated Switch will be available on October 8 for $350 and will feature an enhanced OLED screen. With the controllers attached, the new model is larger and heavier than the previous generation. Both variants have the same processing power and are powered by a proprietary CPU designed by Intel.

Nvidia

(NVDA). In the note, Goyal stated that his team had anticipated a Switch Pro launch and had factored the higher-priced variant into Nintendo’s business model. According to a Bloomberg News article, the Switch Pro was expected to receive a big update to its graphics and computing processor, as well as the ability to display better definition images. The switch’s already burgeoning popularity would have benefited from the boost to 4K graphics and more powerful hardware. “The 2021 holiday season will be the Switch’s fifth holiday season and sixth [fiscal year],” Goyal wrote. “We are nearing the conclusion of the cycle (indeed, new investors believe Nintendo will see sustained earnings growth from digital sales and online subscriptions).” Sixty percent of analysts covering Nintendo rank the stock as a Buy, while 35 percent rate it as a Hold. The average price objective is 77,738. Nintendo’s stock on the New York Stock Exchange (NTDOY) has had a lackluster year, losing 7.1 percent.

S&P 500 Index

a 16 percent increase In December, the stock reached a high of $82.15. Ninetndo’s stock declined 0.6 percent to $74.81 on the New York Stock Exchange on Wednesday. After the enhanced Switch announcement, the ADRs increased 2.5 percent on Tuesday. Max A. Cherney can be reached at max.cherney@barrons.com./nRead More