Is Nintendo (TSE:7974) Undervalued After Switch 2 Sold Nearly 24 Million Units?
Nintendo (TSE:7974) is back in focus after nearly 24 million Nintendo Switch 2 units were sold in the console’s first year, even with a higher launch price. This has renewed attention on the stock’s recent rebound.
See our latest analysis for Nintendo.
The recent excitement around Nintendo Switch 2 has fed into a sharp rebound, with a 30 day share price return of 27.19% and a 90 day share price return of 24.30%. Even so, the year to date share price return is down 16.77%, and the 1 year total shareholder return has fallen 32.96%, while the 3 year and 5 year total shareholder returns of 53.01% and 91.01% show how different this shorter term setback looks when viewed over a longer period.
If this kind of gaming themed move has your attention, it can be a useful time to broaden your search using the 13 top founder-led companies
Bulls see Nintendo’s rebound and Switch 2 momentum as proof the stock still has room to run. Bears point to recent share price declines over one year. Which side does the current valuation support?
Most Popular Narrative: 7.8% Undervalued
The latest narrative fair value for Nintendo of ¥9,615.72 sits above the last close at ¥8,864. That gap is what is drawing fresh attention to the stock.
Nintendo currently holds a competitive advantage because the unit price of the Switch 2 undercuts the Steam Deck significantly. Apparently, supplier arrangements have secured the supply of LPDDR5X 12 GB modules. The absence of GTA VI on the console during the holiday poses a significant risk. Currently, the Switch 2 is not serving the casual audience. Casual players might not opt for a Switch 2 and stay with their Switch 1. The Switch 2 seems to target a more dedicated audience, which overlaps with its competitors, namely PS5 and Xbox. PlayStation 6 launch in 2027 may pose a risk. In the handheld and hybrid division, Nintendo is the monopoly with more than 90% of the market share. Sony and Microsoft have announced price increases higher than the price increases of Nintendo, which puts Nintendo at the lowest barrier of entry, having not only the cheaper Switch 2 but also offering the Switch 1, which is the only console at a reasonable price value. The 4 GB of RAM in the Switch 1 helps to keep cost low. Households seem to purchase multiple devices. The software lineup for 2026 is rather weak, with its only blockbuster being Ocarina of Time. New entry Tomodachi Life caters to the female audience with good sales. In 2027, however, Pokemon Wind and Waves as well as some unannounced mainline titles will drive sales. Therefore, sales and revenue will increase in 2027. The effects of Nintendo being significantly cheaper than its competitors through successful supply chain management and fair value product design still have to be quantified and will crystalize during the first two quarters of 2027. Total install base across Switch 1 and 2 will hit 200 million devices in 2027. The movie production serves as a complementary marketing tool, also leading to increased sales of software and hardware. Further research needs to be done to pinpoint the exact numbers.
Want to see what sits behind that fair value for Nintendo? The narrative leans on hardware reach, margins, and a future earnings multiple that might surprise you.
Result: Fair Value of ¥9,615.72 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Nintendo’s narrative could be challenged if planned software releases disappoint or if competing consoles pull more of the dedicated audience away.
Find out about the key risks to this Nintendo narrative.
Next Steps
This mix of optimism and concern around Nintendo will not stay settled for long. Check the numbers, weigh the arguments, and judge the balance of 3 key rewards and 1 important warning sign
Looking for more investment ideas beyond Nintendo?
Do not stop with Nintendo. Broaden your watchlist now using stock ideas filtered by quality, value, and resilience so you are not late to the next move.
- Target potential bargains by focusing on quality companies priced below their estimated worth with the 25 high quality undervalued stocks.
- Strengthen your income stream by reviewing companies with resilient payouts and yields using the 31 dividend fortresses.
- Reduce portfolio stress by concentrating on companies that score well on financial robustness through the 57 resilient stocks with low risk scores.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com