– Nintendo today offers a robust 3x upside to reach an intrinsic value estimate of ~$110bn EV.
– The market is massively mispricing Nintendo’s “App Store Platform,” or third-party software and value-added services business.
– Nintendo Switch is a thriving distribution channel that has already attracted a large and thriving ecosystem of third-party games.
– This marks a major strategic shift in how Nintendo views its console business.
– This shift means that software revenues have inflected in recent years, with 2022 the year they overtake hardware sales for the first time.
– Consequently, Nintendo is primed for continued massive margin expansion, from already improved ~35% to 50% based on reasonable extrapolations of trends that are already in place.
– Nintendo’s game business is worth $65bn on $12bn forward revenues, 33% operating margin, and 23x NOPAT multiple.
– App Store Platform is worth $45bn on $3.5bn FY27 revenues, 87% margins, and 30x NOPAT multiple.
– This sums up to $110bn vs $37bn EV today.
Exp. gain: 3x by FY27.
Full write-up (free guest account required):
Nintendo (NTDOY), mcap=$46bn, price $9.91 vs $10.35