Deciding who has the best software platform in gaming is no easy feat, but there’s no denying that Nintendo (OTCPK:NTDOY) (7974.T) has generated some long-lived favorites that continue to generate substantial interest and revenue for the company. What makes Nintendo’s business more challenging, though, is the inescapable cyclicality of the business as new platforms rise, peak, and fall, and with this business having so much operating leverage, profits and free cash flows can swing wildly.
The Switch platform is nearing its peak, but management has thrown cold water on the idea that a new hardware platform is just around the corner. I appreciate the desire to maximize the value of the platform, but the reality is that Nintendo is setting up for earnings and cash flow erosion starting next year, and without a new platform to drive investor sentiment, I believe the stock may struggle to make much headway.
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As The Switch Peaks, Nintendo Needs To Build The Next Growth Engine
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