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Nintendo just lowered its sales guidance — analysts are still bullish

Key Points
  • Nintendo has a strong lineup of software which could drive sales of its hardware in 2019, analysts tell CNBC.
  • Nomura's price target for Nintendo is 60,000 Japanese yen per share. The company's share price closed at 30,720.0 yen per share, after plunging more than 9 percent following Thursday's announcement.
A child plays with Nintendo Labo during the Milan Games Week 2018 at Fiera Milano Rho on October 5, 2018 in Milan, Italy.
Rosdiana Ciaravolo | Getty Images Entertainment | Getty Images

Nintendo revised down its sales estimates for the Switch console, but analysts remain bullish on the outlook for the Japanese gaming company.

The answer may come in the form of Nintendo's upcoming game releases.

"Nintendo's pipeline of software is much more attractive in 2019 than how it was in 2018," Kazunori Ito, senior equity analyst at Ibbotson Associates Japan, told CNBC on Thursday. To illustrate this point, Ito pointed to the impending release of new Nintendo games this year, such as those in the Animal Crossing and Pokemon franchises on the Switch game console.

Nintendo's Switch, marketed as a hybrid console which enables gamers to play on-the-go and at home when connected to a TV, has been a major contributor to the company's revenues. The Japanese firm has shipped more than 32 million units of Switch since its launch. The success of Switch has turned around Nintendo's fortunes in the console market following the lackluster sales of its previous generation device, the Wii U.

"The year is still young" for Nintendo, Serkan Toto, CEO of game industry consultancy firm Kantan Games, told CNBC by phone on Tuesday.

Echoing Ito's sentiments, Toto said 2019 "looks a lot better than last year" for Nintendo's first-party titles, adding that the impending updates of Animal Crossing and Pokemon will likely "sell a lot of copies by themselves."

Nintendo's next target is to let ... users buy more than one Switch console per household.
Kazunori Ito
Ibbotson Associates Japan

There's "absolutely no doubt" about the appeal of these games, Toto said, describing them as "system sellers" which will likely drive sales of Nintendo's hardware.

2019 will be important

The comments from the analysts came on the back of Nintendo posting better-than-expected quarterly profits of 158.6 billion yen ($1.46 billion), beating analysts' expectations of 149 billion yen, according to Reuters. The company did, however, cut its full-year forecast for the fiscal year ending Mar. 2019, and slashed the expected number of Switch units sold from 20 million to 17 million.

"We think this looks a touch cautious based on January sales of Switch consoles via retail store channels," Nomura analyst Junko Yamamura said in a note.

Nomura's price target for Nintendo is 60,000 Japanese yen per share. The Japanese game-maker's share price closed at 30,720.0 yen per share, after plunging more than 9 percent following Thursday's announcement.

Ibbotson's Ito concurred with this view. Nintendo's revised estimate is too conservative in light of the robust sales of new titles such as "Super Smash Bros. Ultimate, " he said in a note. That game alone has sold more than 10 million copies to date, despite only launching in December 2018.

According to a report by Japan's Nikkei, a new version of Switch could be released as early as 2019 — and it may be smaller and have fewer features in order to keep prices low.

"That may happen because Nintendo's next target is to let ... users buy more than one Switch console per household," Ito said, in reference to the Nikkei report. "I think if Nintendo launches the new version of Switch, that may be the new catalyst of driving the Switch console sales."

"2019 will be a really important year" for Nintendo, Ito said.

— CNBC's Ryan Browne contributed to this report.