Overview
Citi has adjusted its valuation and profit forecasts for Nintendo Co. (TYO:7974), lowering the firm's price target for the gaming company to ¥9,300 from ¥11,000 while keeping a Buy rating in place. The revision follows a reassessment of Nintendo's software unit sales and an upward revision to projected research and development expenditures after the company's June 9 Nintendo Direct presentation.
Changes to unit sales and operating profit estimates
The bank trimmed its software unit sales forecast for fiscal year 2027 to 192 million units from a prior estimate of 202 million units. For fiscal year 2028, Citi reduced its projection substantially, cutting the outlook to 202 million units from 230 million units. Alongside these top-line volume adjustments, the firm lowered its operating profit expectations to ¥404 billion for fiscal 2027, down from ¥453.5 billion, and to ¥480 billion for fiscal 2028, versus a prior estimate of ¥589.2 billion.
Valuation methodology and multiple
Citi's updated price target is derived from forecast earnings per share of ¥371 for fiscal year 2027 combined with a price-to-earnings multiple of 25 times, reduced from 28 times previously. The bank states it lowered the multiple to reflect a decline in the average multiple for the Japanese gaming industry - a factor that weighed on the resulting price target despite the maintained Buy rating.
Quarterly expectations and market reaction
For the current reporting period, Citi anticipates Nintendo will post first-quarter operating profit of ¥75 billion, representing a 32% increase year-over-year. That figure sits slightly below consensus estimates, which Citi notes are around ¥76 billion. The firm also projects quarterly software unit sales of 39.9 million units, an amount it indicates appears to be modestly below market expectations.
Market pricing has reflected these developments. Nintendo's shares have declined by 8% since the company's release of fiscal year 2026 results on May 8, trading at lower levels as of the most recent Sunday close. Nintendo is expected to provide formal earnings figures on August 6.
Bottom line
Citi's revisions combine lower unit-sales assumptions and higher R&D spending with a compressed sector multiple, resulting in a reduced price target even as the bank retains a Buy stance. The firm projects near-term earnings and volumes that are slightly beneath consensus, and notes a recent market decline in the stock following the company's fiscal 2026 results announcement.