Chip Shortage Hits Switch Console Production, but Nintendo’s 2022 Game Pipeline Still Attractive

We revise narrow-moat Nintendo’s fair value estimate to JPY 60,000 from JPY 66,000 as we trim Switch’s console shipment assumptions, due to the chip shortage and weaker-than-expected demand. Meanwhile, we retain our view that software shipments will peak in fiscal 2022 (financial year ending March 2023), driven by the attractive game pipeline. Nintendo’s share price has declined approximately 25% from June, as the market is concerned about the slowdown of console shipments. However, we believe that Switch’s lifecycle will be much longer than the past consoles’, underpinned by the rich game line-ups from both Nintendo and third-party publishers, and thus, we view Nintendo’s shares are slightly undervalued.