An analyst in Japan with Macquarie Capital Securities does not see a bright future for Wii U

Wii U will launch later this year (one rumored date points to
November 18) and Nintendo is hoping to make a big splash with the system
this year at E3 in June. Many questions about the console's
capabilities still linger, however, and one analyst in Japan is not too
optimistic about Wii U's long-term prospects.

David Gibson at
Macquarie Capital Securities (Japan) Limited has downgraded Nintendo
stock to "underperform" and remarked that there are "increasingly
problematic structural problems for the company."

Gibson assigned
a target price of ¥10,000 and noted that "if Nintendo went iOS/Android
with games we think the stock could be worth ¥20,000+, but in our view
that's not going to happen."

Ultimately, Gibson said the "competitive position of the WiiU has deteriorated" and he advises avoiding Nintendo stock until E3.

Gibson outlined three potentially big problems for Nintendo:

1.
Wii U GPU is less powerful than Xbox360/PS3 according to developers,
which means it has no edge besides the tablet interface to attract core
users. Initial third-party titles are likely to be only ports from
Xbox360/PS3 titles. A bundled WiiSports/Mario title may help initial
sales beat Wii launch, but Wii was severely production-constrained and
the surprise factor from Wii U is less.

2. iPad with its retina
display shows where Apple is taking its 4 screen infrastructure, leaving
Wii U less connected and less relevant. The GPU processing power for
handsets is reaching consoles such that we think core gamers have no
interest in buying into the Wii U. Apple might add in a controller to
its line-up to be more attractive to core users. MocoSpace survey shows
that 96% of gamers like to play their games at home, and with a better
infrastructure we think iOS will be able to deliver a single game
experience across four screens that Nintendo cannot.

3. Wii U
will have 1-year window to gain installed base before PS4 (Orbis) and
then Xbox Durango launch in late 2013. At that point, the core gamer
that Nintendo is after for the first time will have no interest in Wii
U. We understand that Activision has no plans to support Wii U, which
means the biggest selling title of Call of Duty will be missing; Konami
is also planning minimal support.

On that last point, we reached
out to Activision, and the official answer is that the publisher hasn't
made any announcements about Wii U support. Activision Publishing CEO
Eric Hirshberg has said multiple times that Wii U would more closely
align with the types of games Activision makes, but we'll see how that
translates into support from the company.