Despite the Cut in 2022 Game Shipment Forecasts, Sony and Nintendo Are Undervalued

In light of the slowdown in the gaming industry, we lowered our fiscal 2022 software shipment assumptions for Nintendo and Sony. We believe that consumers' spending is becoming less active due to the uncertain economic outlook and that spending is becoming more skewed toward outdoor activities as the coronavirus begins to abate. As a result, we forecast that game shipments in our five-year forecasts for both platforms will not exceed the peak they had recorded during the pandemic. Nevertheless, we view both shares as undervalued and believe Sony has a larger upside to our fair value estimate as the market is underestimating solid growth of digital content and improving product mix of image sensors.