Nintendo: Switch 2 Cycle Sets Up 60%+ Upside

Excerpt

The following is a 250-word excerpt from my full article on Seeking Alpha: A crowdsourced financial market content service where investors can share ideas, discuss news, and make informed investment decisions. To view the full article without a paywall, please click on the link below:

https://seekingalpha.com/article/4826737?gt=8fccf857c151df30

Summary

• I give Nintendo a strong buy rating.

• The company sold over six million Switch 2 units in just seven weeks, signaling a strong start to the new cycle.

• Margins are under pressure as R&D and advertising spending surge post-launch.

• Digital sales and blockbuster titles remain the key drivers of future profitability.

• Upcoming Mario releases and the 2026 Super Mario Galaxy movie could spark the next wave of growth.

Investment Thesis

Nintendo (OTCPK:NTDOY) (OTCPK:NTDOF) (NEOE:NTDO:CA) has had a record-breaking Q1 for Switch 2 console sales, and I believe its IP will ensure strong future digital sales and, therefore, higher EBITDA margins to—at the very least—match the peak EBITDA of the Nintendo Switch cycle. Though EBITDA margins are down due to high spending on R&D, SG&A, and advertising, as well as a lower profit margin for the Switch 2 versus the Switch, profits and engagement should expand with the release of stronger titles. The Switch console cycle was Nintendo's most successful to date, and I believe there is even more upside to come for shareholders that hold during the Switch 2 cycle.

Background

Let me get my bias out of the way first: I grew up with Nintendo, specifically the Nintendo 64. As a kid, some of my favorite games were The Legend of Zelda: Ocarina of Time, Super Smash Bros., Star Fox 64, Diddy Kong Racing, and GoldenEye to name just some of my favorites…