- Nintendo is launching a new Switch in time for the holidays, but some fans may be disappointed with the lack of internal upgrades.
- The biggest change is the new OLED screen. Management hopes to increase the popularity of the system’s handheld mode.
- It is questionable whether Nintendo has made enough improvement here to persuade buyers to pay a higher price than the original model.
Where should you invest $ 1,000 now?
After months of speculation Nintendo (NASDAQ: NASA) officially unveiled a new version of its popular Switch gaming system. As the name suggests, the Nintendo Switch OLED model comes with an improved OLED (Organic Light-Emitting Diode) screen, which is said to display more vivid colors and better contrast compared to the LCD screen of the original model. It will hit the market on October 8 at a retail price of $ 349, which is $ 50 higher than the original Switch.
Demand for the Switch was very high last year, so it makes sense for the company to take this up with an improved version. The big challenge for Nintendo is to convince existing Switch owners to upgrade at a higher price. Is a better OLED screen enough to inspire new purchases?
A new, bigger screen for handheld gamers
A disadvantage of the OLED model is that it does not involve any internal upgrades to the processing capabilities of the device. There were rumors that Nintendo would be releasing a Switch “Pro” version with 4K support and a faster processor to better handle the Sony PlayStation 5 and the Microsoft Xbox Series X, which has seen high demand since it was launched last fall.
The new OLED screen is larger than the original Switch’s screen, measuring 7.0 inches compared to 6.2 inches on the original. In addition to the larger screen, another important selling point of the new model is the double storage capacity compared to the 32 GB of the original Switch, which many users will appreciate. The OLED model also retains the same battery life as the regular Switch and Switch Lite.
A better and bigger screen is a nice addition, but many Switch owners may prefer to keep their $ 350 to buy a PS5 or Xbox Series X, especially if those powerhouse consoles are at the time of the OLED launch -Switch are already more widespread this fall.
One important thing to know is that far more Switch owners use their device in handheld mode than when connected to a television. That explains why Nintendo made the decision not to improve the device’s graphics performance and instead focus on giving users a bigger screen to enjoy their video games.
Nintendo’s revenue growth had slowed at the start of the pandemic, but it accelerated from a growth rate of 9% in FY 2020 to 34% in FY 2021. Analysts are very bullish on the sales potential of the new Switch this holiday season. Nintendo launches the system on the same day that a new part of the long-running and hugely popular Metroid franchise (Metroid Dread) is released, which should further fuel demand.
In line with previous hardware launches, Nintendo is using the new Switch to boost sales of higher margin software titles before the holidays. This is a smart way to keep sales and profits high when the pandemic momentum wears off.
In fiscal 2021, strong hardware sales led to a corresponding demand for games, which increased operating profit by 82% year over year.
Don’t expect a massive surge in sales
The Nintendo Switch is entering its fifth year since launch, and recent projections show that sales trends are slowly flattening out. As of March, 84.6 million switch devices had been sold, and the company expects another 25.5 million units to be sold in fiscal 2022 (which ends next March). But that won’t be enough to increase sales year-over-year, as Nintendo’s forecast is for a 9% decline in total sales in fiscal 2022.
Keep in mind that this prediction was released before the Switch OLED model was announced. Depending on how the market reacts to the launch this fall, management’s forecast could be revised upwards. But given the lack of major upgrades to the device’s internal specs, I expect the upward trend to remain limited.
Investors shouldn’t expect a large increase in sales. Instead, investors should watch out for a possible future “Switch Pro” release, which has also been widely rumored and which would offer a more solid graphical upgrade to better compete with the new game consoles from Sony and Microsoft.
The article Will Nintendo’s New OLED Switch Boost Sales? first appeared on The Motley Fool Germany.
This article represents the views of the author, which may differ from the “official” recommendation position of a premium Motley Fool advisory service. Questioning an investment thesis – even your own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors.
John Ballard has no position in any of the stocks mentioned. It has been translated so that our German readers can take part in the discussion.
The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Nintendo.
Motley Fool Deutschland 2021