Nintendo (OTC:NTDOY, TYO:7974) was downgraded by Wedbush to ‘Neutral’ from ‘Outperform,’ with analysts stating this reflects expectations that Nintendo’s recent gains are already priced in the best-case scenario for Switch 2 hardware and software sales in the coming quarters.
The analysts maintained their price target of ¥14,000, slightly above Nintendo’s current share price of ¥13,535.
“We are downgrading shares of Nintendo to ‘Neutral’ from ‘Outperform’ as shares have reached our price target of ¥14,000, which we believe fully prices in the best-case scenario of hardware and software unit sales over the next several quarters,” they wrote in a note.
Analysts highlighted several challenges facing the company during the holiday period, including tariff-related price pressures, foreign currency fluctuations, and signs of softer domestic demand.
With Vietnamese goods now subject to a 20% tariff, Wedbush expects Nintendo to “raise prices across its accessories and some games to pass through tariff-related costs to US consumers.”
The firm expressed concern that consensus expectations for Switch 2 demand may be overly optimistic, noting that “cumulative unit expectations through year three outpacing both the Switch 1 and Wii… two of the bestselling consoles of all time that featured new, innovative tech vs. the more iterative tech featured in the Switch 2.”
Wedbush also pointed to a relatively soft slate of announced titles and the fact that ample domestic hardware supply has outpaced demand during the quarter, suggesting that Q2 hardware sales may decelerate.
While the broker expects Switch 2 unit sales to rise meaningfully during the holiday season, they cautioned that this outlook is largely priced into current valuations.
“In Q3, we expect unit sales to rise meaningfully, as Switch 2 is likely to be one of the top giftable items this holiday season,” the analysts wrote.
“However, this expectation appears to be widely anticipated in consensus estimates and current valuation at 31x relative to Nintendo’s last five-year range of 14x to 38x, or 21x average.”
Wedbush’s top-line forecasts for fiscal years 2026 through 2028 are slightly below consensus, with projected revenues of ¥2,248 million, ¥2,306 million, and ¥2,446 million, compared with the Street’s ¥2,243 million, ¥2,488 million, and ¥2,617 million.
Despite acknowledging that Nintendo is likely to meet expectations, Wedbush highlighted limited potential for additional share gains.
“We remain positive on Nintendo and expect the company to hit our lofty expectations; however, we see limited upside from here,” the analysts concluded.