Shares of Nintendo Co. surged by as much as 6.4% on Wednesday morning, marking the company’s biggest gain in over seven months. This jump came after Goldman Sachs Group Inc. reinstated coverage of the Japanese gaming giant, projecting that the much-anticipated release of the Switch 2 console would drive a significant increase in active users, bringing the company to new heights.
The investment bank assigned a buy rating to Nintendo and set a 12-month price target of $7,753 USD, representing a 26% upside from Tuesday's close. The upgrade reflects confidence in Nintendo’s ability to rejuvenate its hardware sales with the new console, which is expected to reignite interest among both dormant users and new players alike.
A New Era for Nintendo with the Switch 2
The Switch 2, scheduled to be officially unveiled on April 2, will come over seven years after the launch of the original Nintendo Switch, a system that quickly became one of the most popular gaming consoles in history. According to Goldman Sachs analysts Minami Munakata and Haruki Kubota, the Switch 2 will help Nintendo "unlock dormant hardware and dormant users." Their report suggests that the new console will push active console usage to new highs, a crucial factor for boosting sales and overall market performance.
The Switch 2 is expected to retain the core features of its predecessor, allowing family and friends to enjoy gaming together. It will likely support an expanded library of titles, which could be pivotal in reigniting interest among consumers. This, according to Munakata and Kubota, will contribute to a "renewed growth phase" for Nintendo, helping to drive earnings from the next fiscal year onward. The firm had previously experienced a slowdown in Switch sales, which had pressured revenue in recent quarters.
Boosted by Software and Content
The analysts also highlighted that the Switch 2 will likely launch with "numerous new software titles," which should further drive console sales and enhance the user experience. This expansion in content is expected to bring fresh excitement to the gaming ecosystem, attracting both new players and existing fans. Nintendo’s ability to deliver high-quality exclusive games is one of the key factors that differentiate its consoles in a crowded gaming market.
Additionally, an Insider Gaming report stating that Nintendo might release new software in three phases for the Switch 2 is also likely contributing to the optimism surrounding the console's launch. Bloomberg Intelligence analyst Nathan Naidu pointed out that the promise of multiple software drops over time is boosting investor confidence, as it could provide consistent content and keep users engaged for a more extended period.
Nintendo’s Future Outlook and Market Growth
The anticipation surrounding the Switch 2 has significantly influenced Nintendo’s stock price, pushing it to all-time highs. Analysts are optimistic about the console’s potential, with projections indicating that the Switch 2 could be a key driver of video game market growth until 2027, alongside other anticipated titles like GTA 6.
The announcement of the Switch 2 is expected to trigger a “renewed growth phase” for Nintendo, counteracting the revenue pressure caused by recent declines in Switch sales. However, much of the excitement revolves around the console's hardware improvements and its ability to expand the gaming landscape through an enhanced user experience and an impressive array of new titles.