Are Nintendo Shares Still Plagued By Overdone Bull Run In 2016?

Nintendo Co., Ltd (ADR) NTDOY will close out an eventful 2016 when the company reports Q4 earnings on January 31. According to Wedbush analyst Michael Pachter, even a possible holiday season earnings beat wouldn’t be enough justification to buy the stock.

“We believe that the share price run-up in the second half of 2016 was overdone, as we remain skeptical about Pokemon Go’s staying power and economics, Super Mario Run’s monetization, and Nintendo Switch’s long-term potential due to its pricing and release date,” Pachter explained.

Expectations

Wedbush expects Nintendo to maintain its current 2017 guidance, assuming the Switch’s launch date remains March 3. There’s no question that the Switch has generated a lot of excitement in the market ahead of its launch. Pachter noted numerous accounts of retail sellouts ahead of the release. However, he questions the device’s longevity at its $300 price point. He pointed out that Sony Corp (ADR) SNE’s PS4 and Microsoft Corporation MSFT’s Xbox One can easily be found for under $300, even with a free game included.

In addition, while the Switch has an impressive batch of first-party content lined up, limited third-party content could make it difficult for the console to remain competitive down the line.

Wedbush maintains a Neutral rating on Nintendo stock.

Nintendo is set to release its third quarter 2017 earnings on January 31. At last check, shares were down 1.75 percent at $25.79.