A new demographic of casual gamer has handed Nintendo a turnround that keeps on rolling. Net profit in the year to March rose 86 per cent to a record ¥480bn ($4.4bn), boosting the company’s cash position. Nintendo now has cash and cash equivalents of ¥932bn, up from ¥621bn the previous year.

Achieving such earnings with the help of an ageing Switch console is unexpected. The typical console revenue cycle starts to fall after four years. Switch is in its fifth year. In normal times, the lack of a new console in Nintendo’s line-up would have meant a rough year.

But the Japanese gaming company has been on the winning side of a boredom boom. Its cartoon fantasy game Animal Crossing turned out to be a pandemic-era hit, with people around the world using it as a virtual hang-out. Nintendo Switch, the only way to play the latest version, became indispensable.

Shares already reflect this stroke of good luck, gaining more than a third over the past year to trade at 27 times forward earnings — a steep premium of more than 50 per cent to local rivals such as Sony.

The outlook is more challenging. The Switch is going head to head with next-generation consoles from Sony and Microsoft, launched in November. Meanwhile, the global chip shortage will squeeze supply and production.

Yet Nintendo is targeting sales of 25.5m, not far from the last year’s 26.5m goal, for the year to March 2022. Admittedly, it has a pricing advantage. The Switch costs about $299 in the US, compared with the PS5 at $499.99. Marketing costs, typically front-loaded in the early months of a new console launch, are lower for the Switch than for newer consoles.

Rising Covid-19 infections in Singapore, Indonesia and India might drive up demand for more at-home entertainment. Sales would get a boost if reports of an updated Switch with faster graphics and a sharper Samsung OLED display are true too. Even so, the global return to normality makes Nintendo’s sales targets look overly ambitious.

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