(Bloomberg) -- Nintendo Co. shares may extend their record climb beyond the upcoming Switch 2 launch on anticipation of new hit games and other content surrounding the console’s release.
The Mario Kart creator’s focus on success in games, while leveraging its intellectual property into movies and theme parks, makes it look like a safe bet for tech investors amid the volatility sparked by Chinese AI startup DeepSeek, analysts say.
Since the success of The Super Mario Bros. Movie in 2023, the market has started “to value Nintendo as a content creator rather than just a hardware manufacturer,” according to JPMorgan Chase & Co. analyst Junko Yamamura. She expects the stock to continue rising on the company’s “unique” software selling strategy, which includes character merchandise and mobile games.
The stock fell in the wake of the new console announcement two weeks ago on lack of surprise, but has since resumed its rise. The shares are up nearly 25% in the past 12 months, more than double the rise in Japan’s benchmark Topix gauge, taking its market value to an all-time high of more than $87 billion.
While results due Feb. 4 will likely show continued weakness on waning demand for the almost-eight-year-old Switch, sales of its successor should help drive a revival from the fiscal year starting April, Yamamura wrote in a report earlier this month. She started coverage of Nintendo at overweight, and estimates profits will climb to a record high by the fiscal year ending March 2030.
The company has promised more details on its new console in April, but the launch date is yet to be announced. While execution risk remains for the hardware, investor optimism is growing on hopes of new blockbuster software titles from Nintendo and third-party developers, as well as other ways to capitalize on the company’s trove of beloved characters.
“It’s not the Switch 2 itself that’s going to drive earnings,” said Michael Pachter, an analyst at Wedbush Securities Inc. “It’s software sales, Nintendo online subscriptions, movie royalties and the opportunity for theme parks to become something bigger.” The company is working on a movie based on its hit Legend of Zelda games and is planning to expand its Mario-themed Universal Studios attractions to parks in Singapore and Orlando.
Pachter expects Nintendo to release a new multiplayer game, Mario Kart 9, in tandem with the Switch 2, boosting its shares. Until the console’s official launch, however, the stock may see volatility around leaks on the details, he cautioned.
Indeed, short interest jumped back to 0.9% of the free float as of Jan. 29 from less than 0.3% two weeks earlier, S&P Global Inc. data show. That’s still well below the 2.2% it reached last February. Technicals are overheated, and the stock’s earnings-based valuation is at a seven-year high.
While sales of the Switch 2 may boost earnings, the console may also expose Nintendo to tariff risks. A high blanket duty on all imports under US President Donald Trump’s administration would hurt the company, said Wedbush’s Pachter, who predicts around 40% of Switch 2 sales will be in the US.
But Nintendo’s focus on entertainment content, rather than hardware, provides more shelter from geopolitical tensions compared with some other tech names. Its shares also saw support amid the recent rout in chip stocks on worries tied to China’s low-cost AI model DeepSeek.
Companies with strong content offerings are seen as attractive safe havens in tech as the AI boom unfolds, wrote UK-based analyst Pelham Smithers in a note this week. “The DeepSeek scare has sent the AI infrastructure story into a tailspin, leading to a rotation back into videogame stocks” like Nintendo, which doesn’t rely on high-level chips or data centers, he wrote.
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--With assistance from Subrat Patnaik and David Watkins.
