Ryan O’Connor of Crossroads Capital Partners presented his thesis on Nintendo (US: NTDOY; Japan: 7974) at Wide-Moat Investing Summit 2026.
Thesis summary:
Nintendo is, in Ryan’s view, the most mispriced it has been in his seven years of ownership. The market still values it as a cyclical console-hardware vendor near 7.5x depressed mid-cycle Switch 1 EBIT. Yet the Switch 2 changeover did not reset the user base: annual playing users held near 129 million, up from about 35 million in 2017, a 20% CAGR. Hardware is now the access point; switching costs are the software life attached to the account, closer to iOS than a game box.
FY26 (calendar 2025) was Nintendo’s strongest revenue year, though launch-year hardware mix compressed margins and masked a new margin architecture. Variable pricing holds first-party digital at $59.99 while lifting physical to $69.99, steering buyers toward digital; Game-Key Cards keep the physical price anchor but strip out NAND cartridge cost, sometimes netting more than pure digital. Digital mix sits near 55% versus a Western peer mean of 83%. Ryan sizes the two levers at about $2.3bn of added annual EBIT, versus a $3.0bn Switch-era average.
The DRAM/NAND cost cycle that worries bears instead favors Nintendo’s mobile-class design. Switch 2 absorbs $24-30 of memory per console, 11-14% of BOM, versus $82-122 for PS5 and Xbox, leaving post-hike hardware gross margin at 23% against about 11% for the PS5 and 7.4% for Xbox Series X. Meanwhile, about 40 day-and-date third-party AAA titles are confirmed for the platform in 2026, an 11x step-change, each paying a 30% platform toll plus 30% of live-service microtransactions.
Downside is floored by $31bn of cash and conservatively marked non-core assets, about 63% of the $50bn market cap. The largest piece is The Pokémon Company: equity-method earnings, broken out since 2023, rose to ¥82bn in FY2026, and at 32x they value the reported 32% stake at $15bn or more. Add an untapped NSO pricing umbrella over 34 million members and an Illumination film flywheel, with The Super Mario Galaxy Movie past $1bn, that doubles as profitable customer acquisition.
Ryan anchors a base case of about $80 per ADR on operating cash flow, with $17-43 of option value and a Game-Key Card stretch case near $102. The shares recently traded near 5x EV/FCF on FY2029 estimates and 3x on FY2031; even a bear case of Switch 1-equivalent attach and 17.5 million consoles a year leaves the stock below 10x EV/FCF three years out. Ryan sees no realistic path to a loss and several to 3-5x. Risks include weaker software attach and fading third-party support.
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Wide-Moat Investing Summit 2026 was held from June 23-26, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
