Chit Chat Stocks - Is Nintendo Stock Dirt Cheap Today? With Leandro From Best Anchor Stocks (Ticker: NTDOY)

Episode Date: March 4, 2026

On this episode of Chit Chat Stocks, we bring back recurring guest Leandro from Best Anchor Stocks for an update on Nintendo (Ticker: NTDOY). We discuss: (00:00) Introduction (01:56) Nintendo's Transition to Switch 2 (03:39) Reasons Behind Stock Price Decline (06:33) Memory Chip Costs (10:19) Nintendo's Software Strategy and Future Plans (20:58) Non-Gaming Aspects and IP Monetization (28:30) The Legacy of Shigeru Miyamoto (30:51) Valuation (34:44) Capital Returns: Buybacks and Dividends (40:38) Tariff Risks and Market Dynamics (45:25) Nintendo vs. Roblox: The Future of Gaming (50:57) Earnings Durability and Business Resilience (53:46) Misunderstandings About Nintendo's Business Model Best Anchor Stocks: https://www.bestanchorstocks.com/ Complimentary article on Deere: https://www.bestanchorstocks.com/p/deere-cultivating-technology ***************************************************** Sign up for our stock research service, Emerging Moats: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is presented by Interactive Brokers. You research your investments, but did you research your broker? In 2025, IBKR retail clients averaged a 19.2% return, beating the S&P 500's 17.9%. Over time, the broker you choose makes a difference. If you want to learn why, head on over to IBKR.com slash 2025. More on this later in the show. Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the

world of investing. As a quick reminder, Chitchat Stocks is a CCM Media Group podcast. Anything discussed on Chitchat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. welcome into chit chat stocks the podcast to help you find your next great investment today we bring back on leandro from best anchor stocks a newsletter covering a plethora of high quality businesses and today we are covering a stock that leandro has followed for a long time we have followed it for a long time as well as well as some other recurring guests on the show it is Nintendo. It was a big winner last year, the United States ADR, just for some context for

the listeners, but you can look up the chart yourself. It went from $15 to I think a peak of $25. It may have not hit that number, but just right around there. Now we're back below $15 for a variety of reasons. We're going to get into that on the show. But before we get started, let me say that we will have a link to Leandro's newsletter in the show notes. If you like this interview go check out some of his work let's get right into it Leandro welcome to the show give us an update on Nintendo's business as it stands today first of all guys thank you very much for for having me back I don't know if it's the fourth fifth I don't know probably fourth for sure so I mean Nintendo I would say right now is in an unprecedented or uncharted territory

because it's going through a continuation of a platform, right? So in the past, Nintendo has had, let's say, semi-continuations of platforms, right? Like you had the Wii, then they tried the Wii U. There were some similarities across platforms and names, but it's the first time I would say that we have seen directly Nintendo say, hey, I'm going to launch the Switch 2 after the Switch 1, right?

That transition from 1 to 2. So this breaks with the usual or historical hit-driven model that Nintendo has followed. So in the past, Nintendo used to launch a platform, and then the cycle was, I don't know, 6, 7 years. And then in year 7 or 8, they launched a new platform, and they basically restarted all the business from scratch. The only thing that was, let's say, common across all platforms

was the IP that they were going to exploit. So I'd say it's a very interesting moment in Nintendo's history, right? Because every investor was asking for this continuation, and now it has happened. But as you said, Brett, the stock is not following what investors wanted. So very interesting time in Nintendo's history. Okay, let's talk about why the stock got cut in half. Maybe you can also talk about the Switch 2 launch at the same time.

I know it's related to that. But we hit a peak in the summer of about $25 a share. That would have been, I think, in the July or August period. Not really important, the exact month. What happened here? I know people talk about memory. They talk about a weak software lineup. What exactly do you think, someone who follows the company closely,

why, at least in the US ADR, has the stock totally collapsed? I'd say there are a couple of reasons. First one, I think it's current margins, which is related in some sort of way with the software narrative, right? So Nintendo did not have a very strong software lineup for the Switch 2 launch. So then you had a higher proportion of hardware sales

and then margins probably disappointed. and also that the market doesn't know what the margin on the Switch 2 is, right? We already know because management told us that it's lower than for the Switch 1, but evidently current margins are down. This is also kind of natural when you are doing a platform transition

because you're going to sell a lot of hardware, which is low margin, and then you will eventually monetize the install base through software sales. I'd say that that is one. The second reason would be future margins, right? Because I know we will talk about this more in detail, but memory chip costs have gone up, right?

Because there's a shortage related to AI. And now the market is worried that memory chip costs going up, it's going to increase the bill of materials for the Switch 2 and pressure hardware margins, right? um i'd say a third one is competition and um not not in terms of real competition but i think there's been some noise around the ps5 uh numbers around black friday cyber monday a lot of people saying that it outsold the switch to but evidently it outsold it with significant discounts um and i also think that maybe people were expecting more of the switch to launch with it which is pretty

crazy because it's one of the best uh if not the best launching in console history but people maybe had uh higher expectations and then i would also say that even though nintendo was not super expensive at 24 25 it wasn't super cheap to to start with right so evidently that leaves some room for for the stock to to correct but i i'd say that those are the four main reasons that i would attribute the decline in the stock price. And probably the most significant of those would be the one related to the memory chip costs. So on the memory chips, has management given any sort of visibility into whether or not

this cost headwind is going to persist? And if it does, what kind of levers can they pull to potentially pass those through? So they have provided some color around this. I would look at this from two angles, right? Because it can create two potential problems, right? First one is that hardware margins go down, but you are able to get access to those memory chips. I'd say that's the preferred scenario.

And then the worst scenario is not only are costs going up, but availability is low, so then you cannot even manufacture the switch, even if at a loss, right? that would be much worse and i'd say management during the last q a session sort of said that this was not a possibility because even if they were they are not fixed price they had long-term agreements with suppliers so they were going to get access to the chips probably at a higher cost they also said that with the inventory in hand and not inventory both of finished product

of raw materials, they were able to survive this year without an impact on margins and potentially sometime throughout next year, right? So if the shortage lasts longer than fiscal year 2026, then, I mean, it can potentially impact the hardware margins. But, I mean, management has anticipated to an extent the shortage right so i'm not worried about the cheap shortage for for several reasons the first

one is that a lot of people said at the beginning that hey memory producers want to milk customers they are not going to expand capacity well we're already seeing that that's not true uh they are going to expand capacity right memory has always been cyclical so i'm not worried about it in fact memory was cyclical when nintendo launched the switch one um back in 2017 if i'm not mistaken 2017 2018 and the problem back then was nand chips and the the other problem or who was creating the shortage back then was apple right apple was launching several hardware uh systems and and they were demanding a lot of nand and nintendo evidently had no leverage because the Wii U had been a disaster

so they didn't have volume. Now they have a lot more leverage to negotiate with memory producers. Then the second point why I'm not worried about this is because Nintendo learned from what had happened with the Switch 1

and they already knew that they were going to have a successful launch so they built a lot of inventory. And then the last part or point that I would say here is that over the long term it's going to be software that drives the profits right so yes i mean if memory chip costs go up then hardware margins are going to be lower today but if i

were nintendo i wouldn't i wouldn't raise prices much right because i want a larger install based because i'm going to sell a lot of software and software is not as impacted by memory uh costs as hardware and then in year let's say five six of the cycle most of my profits are going to be generated from my software platform right so um that's why it doesn't worry me too much over the long term yeah i mean i tried to run some basic numbers myself and i think even if you said memory chip in prices would impact like a 50 50 increase in usd on the the bill of goods you could probably make up for that by selling one or two games to each customer plus nintendo switch online plus other stuff where you could have an impact of like in an extreme scenario at least

again no expert on supply chain analysis but maybe a billion dollars in impact for a year or two if you sell like 20 million hardware units but again the software profits they can generate would be and we'll talk about this later maybe in the five to seven billion dollar range and let me for the listeners give context on your inventory uh using our friends at fiscal ai use our link in the show notes get 15 off any paid plan on march 2018 nintendo and this is in u.s dollars had 1.3 billion dollars in inventory this is right after the switch one launch but on december 2025 they had 2.65 billion dollars which is significantly higher is that kind of what you're looking at as okay they really invested up front in inventory and now they're prepared for

maybe a year um without gonna get it without being impacted by memory chip spot prices yeah i mean and they management has been open about this i mean they they stocked in advance of a successful launch right i think there were rumors that nintendo was actually was asking suppliers for potentially a supply of 25 million switched to for the first year right and they're about to sell well the guidance is for 19 million so evidently that leaves space to sell in in year two even from existing inventory right um i have i think i have slightly different numbers uh to you because i i wrote an article maybe i can send it to you so so you can share it so basically i have that from the launch of the switch one um nintendo had stocked 3 billion yen of raw materials right

um for the launch of the switch 2 they had stocked 179 billion yen so it's 60 times more in terms of raw material and then and this is in addition to 10 times more of finished inventory um so i'd say it's very very significant uh yeah i guess the different yeah if we look at the march 17 march 2017 yeah significantly lower than march 2018 which were then before the launch of the switch one so i think that yeah that's better context for sure um all right why don't we talk about software um i've seen even my friends have texted me you know hey well nintendo's not putting at any games. I'm seeing remakes, old games, third-party games that aren't very popular. And notoriously, management doesn't talk much about their software plans ahead of time.

So for someone that's been following the company for a long time now, what do you think management's plan is for software, meaning games, subscriptions, all that stuff? And are they just giving up on producing any of these anymore? I'm kind of asking that facetiously, but what are your thoughts in general on the software i think that software is a topic where you can see the glass half full or half empty and how you're going to see the glass is going to depend whether of you if you're a consumer or you're an investor so from the point of view of consumers you're like okay so the one piece of our lineup the first party software lineup has not been great at launch so I basically don't have a reason

to buy the Switch 2 right now, right? From the point of view of an investor, I see that as these guys are going to sell 19 million Switch 2 without a strong first-party software lineup. So what's going to happen when they start monetizing their best IP in the Switch 2 platform? I think a lot of the games have also been cross-platform

and they have not pulled the lever of exclusive switch to games which are evidently going to will probably uh drive switch to sales and i think that this has been a deliberate strategy right i mean management probably knew that switch to sales were going to be strong either way uh first year post launch there's no i mean there's no reason to sell 40 million or to try to sell 40 million because you're not going to have enough supply for that um so if you know that you're going to be you're going to sell pretty much all of your supply why would you exploit your one of your best selling points which are which is software to sell hardware right because in this business evidently it's

the software that's that's selling their hardware and i think this is a delivery strategy and you can see it clearly in the fact that nintendo is launching the first movie this year right instead of quite like meeting with um they could have done it to launch the first movie in the first few months of the switch to right and try to sell as many switch to as possible but they didn't and in the last q a furukawa was quite clear that they know that years two and three of the platform are probably the most important ones because, you know, year one, it's novelty, you're going to do well, but years two and three

is really when you're going to need to prove that the platform is durable. And the way to do that is with software, right? So as a consumer, I would be probably disappointed with the 1P lineup, but as an investor, I'm like ecstatic, right, that they've managed to sell 19 million units and they've not even launched Zelda game that probably comes in

2027 when the movie is launched they've not launched a good 3D Mario game that probably comes this year with the movie so I don't know I mean I think a lot of those games will probably be

exclusives right that will drive upsell from Switch 1 to Switch 2 or an upgrade so I understand the criticism but at the same time i think nintendo's management is thinking ahead of this year right in terms of of software you research your investments you analyze markets you manage risk but did you research your broker

in 2025 ibkr clients outperformed the s&p 500 retail clients averaged 19.2 percent while hedge fund clients averaged 28.91% compared to the index's 17.9%. IBKR's lower trading costs, competitive rates, efficient execution, and access to more than 160 global markets helps investors keep more of what they earn and put more capital to work. Over time, the brokerage you choose makes a difference. If you care about performance, find out why the best informed investors choose Interactive Brokers at IBKR.com slash 2025. Interactive Brokers is a member of SIPC. So they wanted, essentially how you're saying it is, they knew they were going to sell a lot of hardware this year. They didn't need to produce a ton of profits. They could also get

profits. For example, I believe, and correct me if I'm wrong, the Pokemon title that just released was on the Switch 1 and the Switch 2. So they could also still make money from software sales from that i mean if you look it's not like they're losing money at the moment in this hardware uh launch but they're still making games and they've talked about in their investor presentations that they've increased i think development numbers for games by like one and a half times since 2017 which is right when the switch one was launched and they had a huge amount of first party games so in like years two three four and five of the switch two is maybe they're actually going to have more games than usual where year one they kind of just sacrifice that and say

instead of having the mario game at launch the 3d mario game and then having another one in year two they can have both the mario and maybe something else so so how i would how i would frame this is that when they launched the switch one had a better first party lineup they needed the switch one to be a success uh right they were coming from a failed platform with a switch two i think it's more they knew the switch two was going to be a success so they didn't need to force anything right in the switch one you could not afford to not have software selling your hardware um in with the switch two you can afford that and they've proved it right because they have not released a lot of first party uh massive games and they've like sold like hotcakes so

i think that the two environments are very very different um so i'm not i'm not very worried because i know that a good 3d mario game is coming i know that a good um zelda game is coming sometime i know pokemon generation 10 is coming down the line so i see it more as a tailwind rather than a tailwind for the future rather than a headwind today, right? Because, I mean, they are still selling a lot of hardware, so it's basically you cannot see the headwind in the numbers, but you are going to see the tailwind

of software releases in the numbers eventually. Yeah, not to mention Animal Crossing, Splatoon, those are both 10 million unit sellers as well. Well, and Pokemon Pocopia, that i think it's like two weeks till launch and i think it's already number one in amazon uh japan yeah i mean the japanese consumer loves nintendo and i think they did mention that hardware was a little bit better in japan and it was slightly underwhelming the united states which did freak people out a bit the last thing i want to talk about with the launch they guided for 19 million

hardware units this year for the Switch 2, not including the Switch 1. But when you look at the pace of sales, and this is how I was looking at it, they might have already surpassed 19 million units sold by the time they made that guidance in February. So do you think they're purposely sandbagging the guidance? And what do you think the actual figure could be

for fiscal year 2026? I mean, you guys had a great piece on Nintendo a while ago that I think that you compared hardware units, actual numbers to management guidance, and that you released two charts. I actually used those charts in some of my articles. And I think when you look at that, you can clearly tell that Nintendo's management

tends to be much more conservative with software guidance than with hardware guidance. So, I mean, I think they can beat 19 million, but at the same time, I don't think they are massively sandbagging the number. So, could we see 20? Yes, potentially. But I think in terms of when I think about management sandbagging,

I always think about software rather than hardware because through history, that's where most of the delta has been rather than in hardware. but i mean it's possible that they sell more than 19 19 million okay let's talk the i guess non-gaming aspects to nintendo so they had the original mario movie launch i want to say around 2022 2023 i might be getting those dates wrong they had the launch of the theme park at universal studios in 2023 as well and i think they've got the second mario movie slated to come out i'm seeing previews for it i don't know what the date is for the movie actually launching how is this

sort of full entertainment flywheel impacting nintendo's business how is it benefiting the actual gaming operation as well so i think the ip monetization is something that people are taking for granted because you know it's nintendo they have great ap they are monetizing it but in reality it's evident that nintendo is now more open to monetizing and utilizing its ip right i mean the current management team has been much more vocal about hey we're not just a video game business we're an entertainment business and we want to increase the number of touch points with with our consumers be it through video games movies theme parks whatever right um i think a lot of people when you tell them that nintendo is monetizing their ip they'll focus on direct

monetization um so they'll say okay how many how much money is going is nintendo going to make with a new mario movie that comes out in in in april but i think the most important part of it is the operating leverage that it creates on the video game business right um i i typically say that nintendo is one of the few companies that gets paid to do marketing because they'll release a movie they'll make revenue from that movie but at the same time that movie is serving as marketing for the video game platform and i mean this was very evident when nintendo launched the first mario movie uh it was i think the sixth or seventh year of the switch one cycle uh maybe seventh and when they launched this i mean you could clearly see in hardware and software sales

that the movie had been launched, right? So Nintendo saw massive leverage in sales and marketing, massive leverage in R&D. So I think that's the most interesting part of the IP. And obviously the most interesting part is that Nintendo historically has not monetized it to the extent that they are going to monetize it going forward. That was actually one of the criticisms

that the company received, right? I mean, they're Japanese, they're sitting on this treasure trove of IP and they are not willing to monetize it. And that would be very high margin revenue, right? So I think that you can clearly see now that they are not only more open, but have more of a strategy to do it.

So they're going to release one movie per year. We have Mario this year, Zelda next year, and we still don't know what the third year will be. And I mean, I think it's going to be spectacular, right? Because if the results were good on a seven-year-old cycle, what are the results going to be on a newly launched console and maybe a newly launched game? I mean, I think it could be incredible, right,

in terms of operating leverage. Right, I mean, for context for the listeners, the Mario movie, I think, yeah, Ryan's right, it was either 2022 or 2023. I believe early 2023 was the year, but that helped promote the old 3d mario game which came out in 2017 i think with the launch of the switch one so if you have the either follow-up to mario super mario odyssey or a new 3d mario game going this holiday season or or maybe even earlier at a launch i mean yeah that

could just be a much better in conjunction when you're actually launching that and orion you have something to add there as i say and i also i think there's there's maybe a tendency for people to think that they are milking their existing brands for by producing all this content around them like having the the movies the second movie all the derivative games off of mario that people kind of think like well that you know they're sort of eroding the brand but i it just has never proven that way and adding touch points like a theme park movies more games it's i think if anything it's just expanding the fan base around mario and i guess pokemon has had its own sort of tv shows as well yeah own ecosystem yeah yeah i mean my wife has never been a nintendo fan and

when we went to watch the mario movie she enjoyed it so you you never know when she's going to end up like becoming a nintendo fan right and and i think there's probably some fears that nintendo maybe becomes disney with marvel um but at the same time if you think about it so we have a mario movie this year we have zelda next year probably in 2028 you're going to have a different franchise who know who knows maybe they do something with pokemon so then you wouldn't have theoretically any new mario movie until 2029 because they're going to do one movie per year so then you have three years between mario movies which doesn't seem like they're over exploiting the the ip right um i mean nintendo evidently has heavy hitters like mario zelda pokemon but

the ip is pretty broad right i mean i suppose that mario is going to sell much better a mario animated movie than a splatoon movie right but i mean that that's for sure but um i don't know i mean it's the return on these things have to be crazy i mean even the return on the movie itself is already very good right you make quite a significant profit of an animated movie but when you factor in all the sales that you're making in hardware and software based on the movie i mean the returns have to be exceptional probably one of the highest that i've uh ever seen and the only problem is that there's no way of calculating it but um i mean management probably knows that this is quite a profitable thing to do the last thing on the entertainment expansion how important

do you think it is that the essentially the founder of modern nintendo at least from the entertainment perspective uh shigeru miyamoto apologies if i'm mispronouncing his name is in charge of this stuff from a broad perspective he switched kind of from being in charge of the video games to being in charge of that and that's kind of what i would say as an older man he's kind of his final curtain call for the company what what thoughts on that and the importance of him maintaining quality for as they expand to new entertainment form factors i mean i think he has been very very important for nintendo uh right and evidently not having him in the future is worse than having it is much worse than um than anything but at the same time i mean this is a

japanese company if you want someone to think about succession you know that there is going to be japanese probably um so i think it's not going to be a huge change uh to nintendo but at same time there's uncertainty because the modern nintendo has not lived without miyamoto at the at the creative um helm right so i think it's good that he focuses on on the movies because that's where nintendo when when they're appealing to the masses that's when they have to try to bridge um the ip with having a broad appeal whereas before they could just appeal through the fan base and do very well but now they are trying to expand beyond that so i think it's very um very interesting and i would also say that the monetization of the ip has also brought a

non-japanese director to the board um which is chris melendandri i think is his name he's the uh i think he's the founder of illumination um so i mean nintendo is changing right they they are a japanese company but they are slowly but steadily modernizing their their operations okay let's talk a little financials i'm someone who follows the company disclosure i do own uh own some shares as well and i when i was trying to and this can lead into more of the valuation discussion but i was trying to think about how much of the life of the switch to roughly in cash the company can generate in cash earnings. I kind of came up with a $30 billion number.

It could be a little lower if membership prices are high for a doomsday scenario, a five-year period, although I think that's very unlikely given what you outlined. Do you agree or disagree with that rough assessment on their capability to generate this much cash over however long the Switch 2 is in existence? I think, I don't know if to say I think or I wish, but I think it's going to prove to be conservative.

I hope you're right. I have higher numbers in my model from today to 2033, and I'm not assuming that a lot of things are happening in the Switch One platform, right? To be fair, the Switch One platform this year was fairly strong in Switch to launch year, But at the same time, we already said that a lot of games were cross-platform, right? When games stop being cross-platform or they are certain exclusive,

then I think the Switch 1 business is not going to do as well. And you'll probably see it decrease more. I think that another reason why it's going to prove conservative is not only because I think the Switch 2 cycle is going to do very well, but also because we must not forget that nintendo has built a lot of inventory um for launch year and when all that inventory unwinds then you're going to get a lot of working capital benefits and that's going to flow directly to to the cash flow right so uh i would say that 30 billion is very doable over the switch to uh life cycle all right folks before we move on let's talk about

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fiscal.ai slash chitchat. The link will be in the show notes. And just to put some context on that, I don't know if Brett mentioned it, but market cap today for Nintendo is about $65 billion in U.S. dollars. So $30 billion in cash flow. And EV is about $45 to $50 billion since they have such high net cash. Yeah, maybe we can talk about that net cash. So a common critique of Nintendo and I guess a lot of Japanese companies in general is that they tend to hold a lot of cash on the balance sheet. do you think they will become more aggressive with their capital returns? What do you think they'll do with the cash on the balance sheet?

And I think rough numbers, about 25% of, they hold about 25% of the market cap in cash currently on the balance sheet. So pretty significant. Yeah, so I think I'm going to say something that maybe in Japan and is considered someone who follows Japanese companies. When I say this, maybe it says that I'm crazy, but I think we're going to see buybacks eventually for Nintendo and significant buybacks, right?

I think so for several reasons. First, like you guys said, they have a huge cash pile. I think it's around $14 billion, something like that. $14, $15 billion. then you have to add to that that they are going to generate a lot of free cash flow so all the impact to cash flows is has already been filled because they had already built the inventory so from now on it can only get better in terms of generating cash um then you also have management which now seems much more comfortable to return more cash to shareholders i mean we already saw

this year that nintendo is increasing the distribution of operating profit as dividends um so eventually nintendo is going to have let's say if they don't do anything with the money they are eventually going to have i don't know 25 billion in cash and they have already proven to themselves that they can transition from one platform to the other more or less seamlessly I mean, the cash pile is there for a reason, right? In 2012, Nintendo suffered its first financial loss in 30 years, right? Probably that scared the heck out of management who said, hey, when we're transitioning across platforms, we need a lot of cash

because Nintendo is not going to fire anyone. So now they know that they can transition seamlessly from one platform to the other. and all the IP monetization is just more of a safety net on top of that, right? And then the last reason is that because contrary to what many people think, Nintendo has already bought stock before. So this wouldn't be the first time, right?

Sometimes in the past it did so strategically because the founding family was selling their shares so Nintendo bought them and canceled them or whatever. but in the switch one cycle i think it was around maybe i'm wrong 2018 2021 or something like that nintendo bought back stock i think it was 700 million uh and they did it really quickly they announced it in a week or maybe maybe a couple weeks yeah so i mean if you think about it nintendo could basically spend 10 billion of their cash pile repurchasing shares reduce shares outstanding pretty significantly

and still have $5 billion in cash on a $50 billion market cap and have all the cash available that they are generating with the Switch 2 platform. So I think it makes sense. And I think, I mean, I'm going to say it again. I wish, I think, I wish and I think

that we're going to see buybacks eventually for Nintendo. um i don't know when now would be an exceptional moment um maybe we get more news at the end of the year but now would be great i don't anticipate that nintendo's management is going to think a lot about the stock price if they want to do buybacks they'll just think hey i have to buy back stock because i don't know what to do with the cash just buy it at whatever price at that moment it is um and and i think it was very telling the the dividend change right i mean nintendo saying hey we're instead of distributing 33 of operating profits we're going to go up 40 i don't think it's significant because it's a 700 basis points increase but more so because

it's kind of telling management team telling the market hey i know that i can distribute more of my cash right i mean i'm safer now i don't need to keep my operating profit i have a huge cash pile so i think capital returns like for any for a lot of japanese companies are going to go up and i and i hope it does i mean i think nintendo's management today announcing a buyback would send a huge signal to to the market um and probably you'd see a very very strong reaction um but But, I mean, they're Japanese. They take their time, right? So I don't think they're going to do anything crazy.

It's not like a typical American company where the stock price is down and then you get, hey, the board just had an urgent meeting and we're approving a buyback, which we are going to do this quarter, right? This is going to be probably more measured than maybe Nintendo at the end of the year saying, hey, we're going to return cash through buybacks, right?

um which is crazy because i i would just buy the stock and not tell everyone because when nintendo claims that they're going to do a buyback probably they're going to start repurchasing at not great prices okay when i sell my business i want the best tax and investment advice i want to help my kids and i want to give back to the community oh then it's the vacation of a lifetime i wonder if my head of office as a forever setter an ig private wealth advisor creates the clarity you need with plans that harmonize your business your family and your dreams get financial advice that puts you at the center find your advisor at igprivatewealth.com new from nespresso blend wellness into your coffee routine with a coffee plus range infused with functional benefits choose

the coffee you love with added B vitamins like coffee plus B12 to help support immune function and coffee plus B6 to keep your day moving or go with the flow and choose ginseng delight our new double espresso with ginseng extract whatever lies ahead don't change your morning let your morning change you discover coffee plus on espresso.com Yeah. Yeah. It's sometimes you can kind of, I think management teams often, not Nintendo's management team, but management teams often use the, we're going to buy back as a way of kind of creating a buoy for the stock price. let's maybe talk briefly about tariffs so i think around 40 to 50 percent of nintendo's business is in the americas broadly that's not purely the u.s but they have a large united states business do you think this is something worth concerning yourself over as a shareholder how do you think

through any sort of tariff risk um i mean i'd say that a lot of the tariff risk is already behind us I hope so, but I see it very similarly to memory costs, right? I mean, this is an incremental price that they're putting on your hardware. But for margins, if you don't raise prices, at the same time, you're going to make most of your money with software. Tariffs don't play a huge role there.

Tariffs there can even be positive because if you raise prices on physical games but not on digital games, then in some sort of way you can push more digital sales which are higher margin for you. So I'm not extremely worried about it to be honest and also Nintendo has diversified away from China to other countries

and you also have to take into account that they have the inventory. Probably they have a huge pile of inventory in the U.S. as well to help reduce the impact of any additional tariffs. But evidently it's a concern. And also from the point of view, if you see it from a discretionary spending point of view, if people have to pay more for other goods

because there are tariffs, then maybe they have less money to spend on things like video games. But I still think video games are probably, together with music, the cheapest form of entertainment, right? I mean, Pokemon FireRed and LeafGreen, they're launching soon.

Well, maybe when this is up, they've already launched, but it's going to be like $19 for a game that you're probably going to play like 30 hours. I mean, yes, it's a very old game, but if you do the cost per hour it has to be like super low right um you buy two games per year and you think about how much time you spend playing them and then you think about going out to to dinner four times and probably going out uh to dinner four times which was much more expensive that all you spend on video games that year yeah even if you look at the price increase that they

implemented on the mario kart world launch i think again it was went from 60 to 80 bucks people were concerned about that there's all the i'd say completely overblown online uh fake boycotts of putting air quotes for the uh the listeners that aren't watching the video but there was no impact to demand on mario kart world because you've increased it to 80 bucks because the people are still going to play that over you know the core audience is going to play that for 40 50 60 hours a year maybe a couple hours a week that adds up and it's not overly expensive especially when nintendo implements the updates for i think nintendo switch online members all that stuff and then you also have to i i think nintendo was very intelligent with mario kart

world because they said okay do you want it as a standalone game 80 do you want it with the switch then it's it's 50 do whatever you want uh i mean and and they're probably going to do that with a lot of strong um with part of their strong ip right when they release a new maybe mario 3d game they probably bundle it uh selda they are probably going to bundle pokemon they can also bundle so i mean nintendo has a lot of tailwinds with their software platform to sell hardware right so i'm not overly worried about the weak uh software that everyone's talking about okay let's talk some other this is a question from the audience that i thought was you know interesting is something we forgot to address when making our own questions and is the fact that roblox active users and daily

usage or whatever metric you want to use are growing rapidly it's popular among younger people uh meaning like people under the age of 18 and there's concerns it's almost like some of these viral ai posts that oh roblox is going to upend the entire video game market people aren't growing up as fans of nintendo yada yada yada 10 20 years from now nintendo's fan base keeps declining that you know heritage um well what's the word that people use the nostalgia is gone this these are some of the viral tweets that i was reading in preparation for this episode what are your thoughts on that and is the roblox bear thesis warranted in your opinion um well i i don't think so first i think they're probably complementary i think that nintendo um consoles are played in

a different way to many other video game uh platforms i'd say roblox is probably much more recurring uh while nintendo is much more of a one-time use so for example i have the switch 2 I've not touched my Switch 2 in three months but if there's a game from a franchise that I like then I'm probably going to use it a lot so I think it's more

more dependent on software releases which are not Roblox is not going to change much of that and I would also say that we might be today the first time

that nintendo has had two generations like firmly crossing so for example i played the first pokemon game i played uh i think was pokemon fire red i mean i could have a kid today and they're launching this again so it's the first time that i would find like a cross-generational game right so a lot of people who grew up playing even now the the modern nintendo the more modern nintendo are probably in a position to start sharing it with their with their kids right whereas i don't think there's that connection with roblox right so it's very tough to get an intergenerational connection with roblox mainly because the parents of a lot of these kids have never played right um so i think that will always make nintendo special and i mean nintendo has competed this

has been the bear argument for nintendo for ages no uh xbox ps5 they have best graphics mobile games in general right yep and at the end what you saw is that nintendo kept uh chugging along and in in some sort of way like a luxury company management doesn't think much about the competitors but rather about what they have to do to to sell well right it's not hey i'm going to react to what ps5 or xbox does uh i'm basically do my thing i'm going to do my thing and and that's probably going to be the the the best strategy i mean the amount of criticism that nintendo got on not chasing the excellent graphics on games, like saying that they were staying behind,

the Switched one was going to be a disaster because you couldn't play games with very high resolution at the end. It's close to being, unless uh sony makes up another 20 million um ps2 sold the switch one would would be the the most sold system in in history right um so i don't know i i understand why this happens with all the great brands right you have a very loyal fan base and then you have the detractors right it's like super polarized you don't have people saying yeah it's fine no you have people saying

it's the best or you have people saying it's the worst and and i and i don't i think that's also a characteristic inherent to i would say also management teams but management teams and companies that are outsiders right when when you're doing something out of the norm then you're going to be either loved or hated right you see that with a lot of management teams where maybe the CEO is a bit eccentric, he's different, he doesn't treat Wall Street the same way, and then you have a lot of people who hate him and a lot of people who love him, right?

So I think that's also a characteristic of being such a special company. Another analogy you can make here is YouTube didn't kill Disney as much as Disney in the Marvel, Star Wars stuff. They really, look, it shows durability of those brands. they've kind of done poorly managing those brands in the last decade and the company is still printing money through its entertainment flywheel so youtube and netflix didn't kill disney just as i don't think roblox or mobile games in general are going to kill nintendo let's hit one more question and this is another one from the audience uh before we hit a wrap-up question and it's on

earnings durability i think i know what they're trying to get out here is that you know people say hey the switch 2 is going to launch they're going to see a huge jump in earnings but then it's going to collapse again and i'll give some context for the audience using again our sponsor fiscal ai use our link in the show notes get 15 off any paid plan in yen terms i think this would be billions of yen before the launch of the switch one they were generating almost break even you know, 29 billion, 29 billion yen. And at the bottom of the switch one cycle before the switch two launched in March, 2025, they were at close to 300 billion yen. And now it's beginning to grow again. Do you think there is now definitive proof we're in an era of more earnings durability

for the business? I think so. And I think I would differentiate between revenue durability and earnings durability. I think earnings are much more durable just for the reason that software eventually makes up a much more significant proportion of sales because you're selling more software to a larger install base and that helps protect the bottom line, right? So maybe you're not growing revenue as fast,

but your earnings are much more durable. And then Nintendo has already proven that they can continue through platforms, right? And there's an openness of the management team to make the business less cyclical. And part of that is the continuation of the hardware and part of that is the IP monetization, right? Which is going to be, this is the one thing

that I said at the beginning that was constant across platforms was the IP. The only problem was that it wasn't monetized recurringly across platforms, right? It was more so monetized through games and with every platform. Now you have a recurring hardware business and you also have more recurring IP monetization

through platforms. So I think earnings are pretty durable. And I mean, if we look briefly at the valuation, I think Nintendo is trading at 20 times EBIT on enterprise value, something like that. This is despite Nintendo being at the early stages of the cycle and what this means for margins so margins are evidently not optimized right now despite the durability inherent to each ip which a lot of people say well yeah but how much is that

worth well you can actually look it up right um let's look at other m&a microsoft bought activision for a price close to nintendo today on ebit um okay some people would say yeah but activision is a software business okay but i think i don't know if that's an advantage or a disadvantage uh compared to nintendo which is uh has both things they have the hardware to protect their software uh in an ai world maybe nintendo proves to be much more durable than purely uh software business. And then Silverlake bought EA for around 30 times EBIT. I mean, there's a lot of value in the IP, right? So I'm not concerned about earnings durability, more so now that management has openly shared that they want to monetize the IP more recurrently.

Okay. Last question here for this episode. What is one thing you think investors misunderstand about Nintendo's business? I'd say one thing that I feel that a lot of people who are new to Nintendo believe is that Nintendo is more discretionary than it really is. Okay, when I sell my business, I want the best tax and investment advice.

I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever center. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com.

New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range, infused with functional benefits. Choose the coffee you love with added B vitamins, like Coffee Plus B12 to help support immune function and Coffee Plus B6 to keep your day moving. Or go with the flow and choose Ginseng Delight, our new double espresso with ginseng extract.

Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. A lot of people say, hey, but during an economic downturn, these guys are getting destroyed. Well, I mean, it's no doubt discretionary. I'm not going to say it's not, but I don't think it's as discretionary as many people think.

So if you look at Nintendo's fundamentals during the global financial crisis and the Asian crisis, I mean, they were very, very resilient. And the stock was also pretty resilient, especially during the Asian crisis. I mean, in 2012, Nintendo had its first loss after 30 years. I think that speaks to a pretty resilient business I also think that people misunderstand

how loyal Nintendo's fan base is like a lot of people will say I can't understand who's going to pay $20 for a Pokemon game that was launched in 2004 well, a lot of people are going to do it I don't like buying myself, yeah yeah yeah i mean uh those pokemon games are already number one and two in the in the nintendo shop so um and then also one thing that i believe nintendo gets little credit for is how they they

protect the ip but i mean we talked about this before i mean nintendo doesn't want to maximize short-term profit by over-monetizing the IP. They prefer to monetize it over time and have a durable business, right? So I think those things are things that people who come from an outside view on the company maybe don't appreciate as much. But when you start looking into the company,

you start to see that they are pretty important in terms of durability of the business and the ability of Nintendo to monetize the IP. Okay, Leandro, thank you once again for joining the show, taking the time to chat Nintendo with us today. Before we get out of here, give listeners an elevator pitch on Best Anchor Stocks and where they can find more of your written work.

Well, they can find it, the easy part is that they can find it at bestanchorstocks.com. And I basically publish research on a wide range of companies. There are two in-depth reports available to read for free, which are John Deere and Stevan Atto. So they can gauge like the quality of the research.

So yeah, I think that would be my elevator pitch. All right. Thank you, the listeners, for tuning into this episode. Thank you once again, Leandro. As a disclosure, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan, I, or any podcast guests may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them.

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