Nintendo rebounds as optimistic signs emerge after a brutal year

Tokyo

NINTENDO investors, battered by slower than anticipated sales of the Switch and a steep share decline last year, are starting to feel optimistic again.

The possibility of price cuts for the machine, an improving software pipeline and the upcoming launch of Nintendo's biggest mobile game in two years are all boosting confidence.

That has helped to fuel a 22 per cent stock jump since a December low, following a peak-to-trough slump of 44 per cent in 2018.

It's not that Nintendo has suddenly solved its biggest challenge: expanding Switch's user base. But concerns over last year's missteps - fewer game releases, the flop of cardboard toy accessory Nintendo Labo, and falling short of its goal for Switch shipments - are fading away.

With software sales for the last three months of 2018 showing strength, profits should stand up despite weaker hardware revenue when Nintendo reports results on Jan 31, according to Pelham Smithers, who runs Pelham Smithers Associates in London. "We favour the stock now," he said. "I have a real problem thinking where the disappointment will come from this year."

Of the 22 analysts tracking the Kyoto-based company, 19 have given it a buy rating, at an average 12-month target price of 49,313 yen (S$612), according to data compiled by Bloomberg. That suggests a potential 46 per cent return from last Friday's closing price of 33,850 yen. BLOOMBERG