Credit Suisse Lifts Nintendo Rating to Outperform, Predicts 130 Million Switch Units Sold by 2022

[The_Liquid_Laser]

RolStoppable said:

The_Liquid_Laser said:

It's encouraging to see some analysts that actually know what they are doing.  This is a great prediction and shows they did their homework.  More people should be listening to these analysts and ignoring basically all of the others, lol.  Good job!

Eh, his position isn't particularly strong. Direct quote from the analyst in the article:

"As Nintendo’s Switch is a unique game platform for use as either a console or handheld, there was initially some uncertainty over whether its sales cycle would more closely resemble that of a console or handheld. Although the Switch is currently categorized as more of a console, we expect it to sell like a handheld. Many users are in fact using the Switch as a portable according to a Famitsu survey of users. We previously projected a sales peak at about three years after launch (i.e., in FY3/19) on the assumption of a console-like sales cycle. Now that the Switch looks more likely to sell like a handheld, we update our sales forecast to reflect a longer sales cycle. We now expect the Switch to achieve peak sales about five years after launch (i.e., around FY3/20–21) like a typical handheld game device. We also raise our peak-year sales forecast from 25mn to 31mn units."

Sounds much more like a hunch than an actually grounded prediction, especially because of the sentence I highlighted. The typical handheld does not peak about five years after launch. It's clear that he expected Switch sales to be similar to the DS sales curve, but the actual reasoning in this quote is next to non-existent.

With the data we have today where we know that consumers have the choice between hybrid and handheld SKU, with the hybrid being the far more popular choice everywhere in the world, the reasoning of Credit Suisse doesn't hold up. This is more of a case where someone got it right for the wrong reason, but granted, back then they were going against the grain and it takes guts to do that when you are in the business of giving financial guidance, because you are putting your reputation on the line.

A few points:

1) The number prediction is more important than the precise wording.  English is not their first language, because they are a Swiss group, so we have to somewhat guess what the precise meaning of their wording is.  At the same time I haven't seen any other group making predictions in 2017 that are looking to be this accurate.  They could have said, instead, that it would sell like a handheld device and total 66m by 2022.  In that case they'd be basing it off 3DS sales and still be majorly lowballing.  The accuracy of the numbers is what matters.  Scientifically speaking, you don't prove something by being right, but you do disprove something by being wrong.  So, while we can't be sure that they had the right reasoning, we can be sure that all other analyst groups had the wrong reasoning.  This is the only group that has a possibility of using the right reasoning.  Given how rare a good Switch prediction from an analyst group is, they desire major credit for this prediction.

2) The typical handheld actually does peak during its fifth fiscal year.  It should be clear from the context they are talking about fiscal years.  (FY3/20-21 means the third quarter of the 20-21 fiscal year).  Here is the fiscal year that each Nintendo and Sony handheld peaked.

Gameboy 13
GBA 4
DS 5
3DS 3
PSP 5
PS Vita 2

The median of these numbers is 4.5.  The mean is 5.3.  The word typical implies median, but they could have also meant mean and the translation was imprecise.  Either way, both of these numbers round to 5.  It is especially understandable why they'd round the median up to 5, since Switch's first FY lasted less than a month.  And of course the peak sales quarter during any year is going to be the holiday quarter.

3) The hybrid vs. handheld dichotomy is not how anyone would have framed their reasoning in 2017.  Instead they would have based their prediction on past data.  Which data do they focus on?  Home or handheld?  If a person want to play games both at home and on the go, before the Switch, then what kind of device would they buy?

Say a person living in 2008 wanted to buy one device and they wanted to play games both at home and on the go.  Would they buy a Wii or DS?  They would buy a DS.  The Wii can't play games on the go.  The DS can play games both at home and on the go.  Sure you can't hook the DS up to a TV.  That makes Switch a better product than the DS.  That also makes hybrid Switch a better product than Switch Lite.  But a person can still play games on the DS at home if they want.  Therefore, the Switch and the DS perform the same basic function, but the Switch does it much better.  Both devices enable a person to play games anywhere.  But at home a person with a Switch gets a performance fairly similar to a PS4, and is much more convenient for local multiplayer.  The DS's performance never got anywhere close to a Wii or PS3, and you have to buy multiple devices for local multiplayer.  So they both do the same job, but the hybrid Switch does it much better. 

At any rate, the hybrid Switch performs the same function as a handheld.  You can play it anywhere.  That is why it makes sense to say it will sell like a handheld.  Clearly, they were bullish on the Switch even before they made this prediction.  They revised the peak year up from 25m to 31m.  They were trying to conclude if Switch would be a Wii-like success or a DS-like success and eventually concluded it would be a DS-like success.

Essentially, they were right on the money with this prediction, and the precision of the numbers shows it.  They were the only analyst group to be right about the level of Switch's success, and they were also more accurate than any individual on vgchartz.  I don't recall anyone here giving a precise number on Switch's sales for an exact and long time period like 6 years and being even remotely close.  In short, they are an actual reputable analyst group and they deserve credit.  They performed real analysis.  They are not a bunch of Michael Pachter's who have the title "analyst" while actually having a law degree, which is useless for data analysis.  When this specific of a prediction is this accurate, then it deserves credit, especially when most analysts are spewing garbage.