---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 202623
conversation_id: 2e2f1e37-aa04-4a3d-bbc8-0580b98d37be
citations: 12
created: 2026-05-31 20:37:15Z
---

# Is CLSA incrementally more positive/negative on Nintendo. If so, why?

## CLSA on Nintendo (7974 JP): incrementally LESS negative on price target, but **rating unchanged at Underperform (U-PF)**

CLSA's headline rating on Nintendo has been **Underperform (U-PF) throughout 2025** — every single primary-coverage note since January 2025 has reiterated U-PF. But the *intensity* of the bearishness has eased materially: analyst Jay Defibaugh has lifted the PE-based price target three times since January, taking the TP from ¥5,800 (late 2024) → **¥8,600** as of the latest 5-Jun-2025 note [1][3], a ~+48% cumulative TP lift while keeping the rating unchanged. Below the surface, however, the company-specific concerns (Switch decline, weak FY3/26 guidance, tariff overhang, "catalyst expended") have arguably grown, so the qualitative thesis is **less negative on Switch 2's long-run trajectory but MORE skeptical that the stock can clear consensus expectations near-term**.

### Price target trajectory — directional softening

| Date | Note | Rating | Price Target | Δ TP |
|------|------|--------|--------------|------|
| 10-Jan-2025 | Fever pitch | U-PF | ¥7,700 | **+¥1,900 (from ¥5,800)** [10] |
| 17-Jan-2025 | Better to travel than arrive | U-PF | ¥7,700 | unchanged |
| 04-Feb-2025 | **Precarious position** | U-PF | ¥7,100 | **–¥600** [9] |
| 27-Mar-2025 | On the cusp with Switch 2 | U-PF | ¥7,100 | unchanged [8] |
| 02-Apr-2025 | Switch off, Switch 2 on | U-PF | ¥7,100 | unchanged [7] |
| 17-Apr-2025 | Tax assessment | U-PF | ¥7,800 | **+¥700** [6] |
| 08-May-2025 | Bananza peel | U-PF | ¥7,800 | unchanged [5] |
| 16-May-2025 | Survey says... Switch | U-PF | ¥8,600 | **+¥800** [3] |
| 05-Jun-2025 | Switch over | U-PF | ¥8,600 | unchanged [1] |

Net change: ¥5,800 → ¥8,600 = **+48% TP lift** over five months. The Feb dip notwithstanding, the trajectory is unambiguously *less bearish on intrinsic value*.

### Why the price target has been lifted (the "less negative" drivers)

1. **Base-year roll-forward into peak earnings**. The January re-rate from ¥5,800 to ¥7,700 was driven by shifting CLSA's valuation base year to FY3/27 (peak Switch 2 ramp), and the April re-rate to ¥7,800 was justified by "applying adjusted average PE over the past 10 fiscal years to peak earnings in FY3/28" — i.e., moving the multiple onto a higher denominator [6][10].
2. **Switch 2 launch execution validated CLSA's medium-term unit assumptions**. The 5-Jun release went ahead on schedule at US$450 / ¥49,980 with Mario Kart World as the launch title. CLSA expects "a strong launch period for Switch 2 and unit sales through year five that rival those of legacy Switch" [1] — explicitly endorsing the Switch-comparable demand path.
3. **Proprietary survey of 1,200+ Switch owners (May)** confirmed "the mindshare domination of Nintendo games" and validated demand for the upgrades. This drove the May TP lift from ¥7,800 → ¥8,600 [3].
4. **Tariff exposure proved manageable in the base case**. CLSA's April scenario analysis concluded baseline 10% tariffs on Vietnam-assembled Switch 2 hardware can be absorbed without a US price hike, and physical software games are tariff-exempt under the 12-April "solid-state non-volatile storage devices" carve-out — narrowing the tail risk [6].

### Why the U-PF rating still stands (the "still negative" drivers)

1. **Original Switch is rolling over faster than consensus assumed**. 3QFY3/25 OP fell 32% YoY to ¥126bn (22% below consensus); Switch hardware units –30% YoY to 4.8m vs CLSA 6.8m and software –20% YoY to 54m. Nintendo cut FY3/25 guidance for a **second consecutive quarter** [9][11]. "The accelerating decline for original Switch is pressuring profits from FY3/26" [5].
2. **Nintendo's own FY3/26 guidance was 29% below consensus**. Management guided FY3/26 OP of ¥320bn vs consensus ~¥450bn; even adjusting for tariff impact (a few tens of billions of yen) the gap is still ~¥100bn [5]. CLSA's CL-26 OP forecast of ¥284bn implies just 61% of the 24-broker consensus [12].
3. **Switch 2 catalyst is "expended"**. The 5-Jun launch removes the single biggest forward-looking share-price catalyst. CLSA: "overly optimistic street forecasts continue to be cut and the Switch 2 release expends a major share-price catalyst" [1]. Implication: even after estimates re-rate downward, the stock loses its primary upside lever.
4. **Survey flagged demand-side red flags**. More than **a third of existing Switch owners do not intend to buy Switch 2**, citing hardware and software pricing and satisfaction with the original device. Interest concentrated on incremental upgrades of legacy features rather than the new GameChat/mouse functionality, "raising the risk that consumers come to view it conceptually as an expensive original Switch" [4]. "The largest grouping of US respondents indicated an unwillingness to pay the current retail price for Switch 2, a problem even before potential tariff-related price increases" [3].
5. **Pre-launch expectations were already "overly rosy"**. From the April note: U-PF maintained "on overly rosy expectations, and see the stock as vulnerable to profit-taking, particularly associated with potential disappointing FY3/26 guidance" [7] — guidance subsequently came in well below consensus, validating that call.
6. **Tariff bear case is severe**. CLSA's bear scenario (reciprocal tariffs on China + Vietnam + Cambodia) would cost FY3/27 OP ¥99bn (–26%). A hardware price hike to US$550-600 would force further forecast cuts [6].
7. **Switch 2 lacks Switch's disruptive design DNA**. "Switch 2 differs from the typical Nintendo hardware offering by not offering a radical new approach to gameplay or the user interface … without strong support for the new social features (GameChat voice chat, camera) or mouse functionality, Switch 2 will struggle to outperform legacy Switch given higher pricing, the absence of a midcycle Covid boost and more handheld competition" [2].

### Bottom line — net direction

- **On valuation / multi-year EPS**: incrementally **LESS negative**. TP +48% YTD as Switch 2 launch risk burned off cleanly and base-year shifted forward.
- **On near-term earnings / share-price set-up**: incrementally **MORE negative**. Original Switch declining faster than expected, FY3/26 company guidance 29% below consensus, survey flagging price resistance, and the Switch 2 launch catalyst now spent.
- **Rating**: unchanged **Underperform** at ¥8,600 TP (vs Nintendo's spot price implying roughly **–26% downside** at the May report priced level) [3]. CLSA's stance is best characterized as "the stock is structurally over-owned by retail-style Switch 2 momentum buyers, consensus estimates remain too high, and post-launch there is no fresh upside catalyst to offset the legacy Switch decline."

---
**Sources**
[1] Nintendo - U-PF (Switch over) — CLSA (5 Jun 2025) — 607961340LinqAlpha.PDF
[2] Nintendo - U-PF (Switch over) — CLSA (5 Jun 2025) — 607961340LinqAlpha.PDF
[3] Nintendo - U-PF (Survey says... Switch) — CLSA (16 May 2025) — 607959742LinqAlpha.PDF
[4] Nintendo - U-PF (Survey says... Switch) — CLSA (16 May 2025) — 607959742LinqAlpha.PDF
[5] Nintendo - U-PF (Bananza peel) — CLSA (8 May 2025) — 607958595LinqAlpha.PDF
[6] Nintendo - U-PF (Tax assessment) — CLSA (17 Apr 2025) — 607956172LinqAlpha.PDF
[7] Nintendo - U-PF (Switch off, Switch 2 on) — CLSA (2 Apr 2025) — 607954926LinqAlpha.PDF
[8] Nintendo - U-PF (On the cusp with Switch 2) — CLSA (27 Mar 2025) — 607954195LinqAlpha.PDF
[9] Nintendo - U-PF (Precarious position) — CLSA (4 Feb 2025) — 607949658LinqAlpha.PDF
[10] Nintendo - U-PF (Fever pitch) — CLSA (10 Jan 2025) — 607947951LinqAlpha.PDF
[11] Nintendo - U-PF (Precarious position) — CLSA (4 Feb 2025) — 607949658LinqAlpha.PDF
[12] Nintendo - U-PF (Tax assessment) — CLSA (17 Apr 2025) — 607956172LinqAlpha.PDF (financials table)

## Citations

- [1] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [2] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [3] **607959742LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959742LinqAlpha.PDF>
- [4] **607959742LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959742LinqAlpha.PDF>
- [5] **607958595LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607958595LinqAlpha.PDF>
- [6] **607956172LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956172LinqAlpha.PDF>
- [7] **607954926LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607954926LinqAlpha.PDF>
- [8] **607954195LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954195LinqAlpha.PDF>
- [9] **607949658LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949658LinqAlpha.PDF>
- [10] **607947951LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607947951LinqAlpha.PDF>
- [11] **607949658LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949658LinqAlpha.PDF>
- [12] **607956172LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956172LinqAlpha.PDF>

