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Even though people have flocked to video games this year, it’s been a tough time for the stocks of
Nintendo
.
The Japan-based company’s U.S. certificates of deposit are down 23% year-to-date.
So the October 8 launch of the company’s updated Switch with a new OLED display is very important.
As summer approached, investors expected a significantly updated version of the system, the rumored Switch Pro, with more powerful hardware that convinced existing users to upgrade.
Instead, Nintendo announced an incremental upgrade to the four-year-old Switch called Switch OLED. The main draw is a new superior – and much needed – display for the Switch’s mobile console. It’s not exactly the new model investors were looking for, but it could still help spark interest in the four-year-old system, analysts at Jefferies Atul Goyal said in a research note last month.
Nintendo (ticker: NTDOY) has sold around 91 million Switch units so far, according to VGChartz. And the console has consistently outperformed the sales of new generation systems from
Sony
(SNE) and
Microsoft
(MSFT) since their launch last year.
For investors, it’s unclear how much growth the upgraded console will generate; Nintendo said the new unit will not increase the margins, and in July, he had no plans to launch additional models. Goyal downgraded its rating on Nintendo shares to Hold in July after the Switch OLED announcement.
As for the new console, the OLED Switch offers some much needed improvements. After about an hour of testing in a conference room at Nintendo’s headquarters in Silicon Valley, the benefits of the new display were immediately clear. The organic light-emitting diode, or OLED, display provides dramatically improved picture quality. The graphics looked incredibly rich when playing the next one Terror Metroid (also slated for launch on October 8).
Barron was unable to test the new unit with older games, but Nintendo claims the new unit is compatible with all Switch games, although “the gaming experience may differ due to the console’s new capabilities, such than the larger screen size “.
Side by side, the OLED version and the standard Switch are almost identical; the new unit weighs 0.05 lbs. longer and is 0.1 “wider – not really noticeable in our hour-long test. Beyond the top display, Nintendo also fixed some of the weird design choices of the first model: it replaced the kickstand fragile and prone to breakage of the original by a much more robust option which also offers more viewing angles, and it has improved the quality of the speakers noticeably. Inside, the new unit has 64 GB of storage compared to 32 GB on the previous Switch model.
At $ 350, the OLED system costs $ 50 more than the original Switch, but the new features justify the higher price tag. Even still, the incremental upgrade is unlikely to cause a wave of upgrades from existing Switch owners and it may worry investors.
Goyal pointed out in an earlier research note that this holiday season will be the fifth for the Switch, which is behind in a console’s lifespan. It’s a great product, but the upgraded model may still struggle to increase sales for a system that is already selling better than the competition.