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Investors and analysts want to see Nintendo move away from traditional hardware cycles to a more iPhone-like model
Usually investors and analysts have a way of talking about video games that show they really don't know much about how the industry works. Today we have comment from multiple investors and analysts that continues that tradition.
In a Bloomberg feature, a number of big names came forward to share their thoughts on Nintendo and their future. While almost all agreed that Nintendo is doing very well and is poised for even greater success in the future, they did take issue with Nintendo's traditional hardware cycles. Instead, most of those interviewed felt that Nintendo would be better served if they moved their hardware efforts to something more in line with what Apple does with the iPhone. In other words, yearly hardware upgrades that see minor improvements over the previous model.
“With every console generation, the install base resets to zero and their earnings power essentially resets to zero. Nintendo can continuously have an install base of say 100 million consoles out there, that just moves along over time.” - Toan Tran of investment manager 10 West Advisors
“Its valuation continues to be inexplicably low. The company is innovating at a level that no one is giving them credit for.” - Aaron Edelheit, chief executive officer of Mindset Capital
“The peak is higher than what I was forecasting before, because of Covid — but the peak is still next year. The bulls themselves don’t have proper growth beyond next year.” - Atul Goyal, senior analyst at Jefferies Group
“The million dollar question here is, is Nintendo the hits-driven cyclical that defined its history pre-2017? ...“I don’t think there’s any reasonable future outcome that’s not a multiple of the current price — even if management stays impossibly insular and trollish when it comes to investors. Results over the next few years will force the market to recognize Nintendo’s true value.” - Ryan O’Connor, the portfolio manager of Kansas City-based investment firm Crossroads Capital
“Nintendo’s games are more popular than they’ve ever been and they’re also as creatively inspired as ever. There is no foreseeable future without millions of die-hard Nintendo fans, but in the first ten days of the month, more time will be spent playing Roblox or Minecraft or Fortnite or Grand Theft Auto than the lifetime playtime of the Legend of Zelda: Breath of the Wild.” - Matthew Ball, a former head of strategy at Amazon Studios and the managing partner at Epyllion Industries
While investors and analysts might think a yearly revamp would work wonders for Nintendo, those who play games most likely see numerous issues. Would new hardware every year bring in games that could only be played on that hardware? Wouldn't yearly releases of hardware fracture and split the users across the install base? Wouldn't developers have to create games for multiple versions of the same hardware, instead of one or two? Wouldn't some of the later hardware iterations be held back by the limitations of the original Switch?