"We think that the timing of a new product introduction will depend upon the sales profile for the DS, and believe that lower than expected DS hardware sales could trigger an earlier launch for the new device," Pachter said in an investor note.
"DS sales are solid worldwide, but are weak in Japan, leading us to expect an introduction of a new device in Japan before the end of the calendar year."
He said that Japanese DS demand will likely continue to decline. He adds, "We think that Nintendo has a new handheld device ready for launch in [Japan] before the end of the calendar year."
It's not the first time that analysts have said Nintendo has a DS follow-up ready to go. Months ago, Colin Sebastian with Lazard Capital Markets said the same.
"Flawless" Victory
Pachter also said "It is clear that Nintendo is executing flawlessly." On Wednesday, the Japan-based game maker announced quarterly sales of $3.9 billion and operating income of $1.1 billion.
The analyst estimates that Nintendo is producing 2.4 million Wiis monthly, up from 1.8 million. "We expect to see a large portion of the increase in Wii monthly production ... shipped to the U.S. market, and believe that Nintendo is well-positioned for dramatic software sales in that territory over the balance of the year."
He added, "Similarly, we think that the lion’s share of the expected 28 million DS hardware units shipped during the fiscal year will land in the U.S. and Europe, and we expect to see strong software sales in those territories."