Morgan Stanley analyst believes Switch is on its way to being a big hit, talks sales projections & more

The following comes from Morgan Stanley analyst Masahiro Ono...

- believes the Switch is on its way to being a big hit
- projects annual sales of the Switch will grow for the next three years from 8.7 million in 2018 to 18 million in 2020
- only by 2021 will sales begin to fall off, but still to an impressive 12.5 million
- he sees total sales of 54 million Switch units by 2021
- not sure Switch will beat Wii in total unit sales, but sees it being more profitable

"The Switch is proving to be very competitive, and we anticipate strong sales for core game titles, boosting our conviction in OP growth through F3/20. Near term, we think the stock will rise as sales trends for likely hit titles are factored in. As a home console, shipments would likely fall short of the Wii, but given that Switch users are less likely to be light users vs. the Wii base, we expect a higher tie ratio and profitability.

Since the March 3 Switch launch, Nintendo has outperformed TOPIX, but probably not beyond the point where pre-launch expectations are priced in; we doubt the success/failure of the real game console cycle is properly reflected. Furthermore, we expect the Switch tie ratio will be higher than in the Wii period. If our analysis is correct, software profit contributions should exceed the profit effects of increased hardware shipments, which we think is insufficiently priced into the stock."