Does Switch 2 Sales Signal More Upside for Nintendo Stock in 2025?

Wondering what to do with your Nintendo stock right now? You’re definitely not alone. Nintendo’s share price has taken holders for a wild ride lately. The past week and month were marked by modest losses of -3.1% and -4.7%. Still, you can’t ignore the breathtaking gains of 44.5% year-to-date and a whopping 74% in the last 12 months. Zoom out to five years, and the stock is up over 150%. That kind of performance keeps investors guessing: is the magic fading, or is there more upside ahead?

Recent headlines have added new fuel to the conversation. Most notably, the Switch 2’s blowout launch with 2 million units sold in Japan in just 14 weeks cements Nintendo’s hardware momentum, even as corporate decisions like outsourcing US support have raised a few eyebrows. Meanwhile, the broader gaming landscape keeps shifting, with competitors facing their own challenges.

With all this excitement, one big question remains: is Nintendo undervalued at these levels? After running through six key valuation checks that analysts use to find bargains, Nintendo comes up empty handed with a value score of 0 out of 6. But don’t be too quick to draw conclusions just yet. In the next section, we’ll unpack the most popular ways to value a company like Nintendo, and later on, I’ll show you an even more insightful approach that might change how you look at the stock entirely.

Nintendo scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Nintendo Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's value. For Nintendo, this involves analyzing how much cash the business can generate over the next decade and determining what those yen are truly worth in the present.

Currently, Nintendo is showing a last twelve months (LTM) free cash flow of negative ¥2.13 billion. According to analyst estimates, free cash flow is expected to rebound and steadily grow each year, reaching ¥619.5 billion by 2030. The initial five years are informed by a range of analyst forecasts, while longer-term projections rely on Simply Wall St's forward estimates. Every annual figure is discounted to account for the fact that future money is worth less than today's.

Based on this two-stage free cash flow to equity model, the DCF calculation results in an intrinsic value of approximately ¥8,884 per share. When compared to the current share price, the numbers suggest Nintendo stock is about 47.6% overvalued using this method.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Nintendo.

Our Discounted Cash Flow (DCF) analysis suggests Nintendo may be overvalued by 47.6%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Nintendo Price vs Earnings

For profitable companies like Nintendo, the Price-to-Earnings (PE) ratio is often the go-to metric for valuation because it directly compares what investors are paying for each yen of earnings. A higher PE ratio can reflect stronger growth expectations, better business quality, or simply more optimism. A lower PE may point to risks or weaker prospects. However, what counts as a "fair" PE depends on factors such as industry trends, the company’s earnings reliability, and overall market sentiment.

Right now, Nintendo is trading at a PE ratio of 51.9x. That is considerably higher than the broader Entertainment industry average of 23.3x and also above the average of its closest peers at 39.1x. A premium like this usually indicates that investors expect above-average performance from Nintendo in the future, but it can also signal a stock that is getting expensive.

To cut through the noise, Simply Wall St calculates a “Fair Ratio” for every stock. This proprietary metric helps investors understand what a reasonable PE would be for Nintendo based on its own earnings growth prospects, profit margins, business risks, market cap, and industry dynamics. Unlike basic peer or industry comparisons, the Fair Ratio puts all these pieces together for a more tailored valuation benchmark. For Nintendo, the Fair Ratio comes in at 47.4x.

When Nintendo’s current PE of 51.9x is compared with the Fair Ratio of 47.4x, the result suggests that the stock is trading a bit above its fair value on earnings, but not by a wide margin.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Nintendo Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story behind the numbers, combining your perspective on Nintendo’s future. For example, you might consider how new consoles, franchise releases, or shifting trends could play out alongside your assumptions about revenue, profits, margins, and fair value.

Instead of relying solely on formulas or static models, Narratives link a company’s business story to a financial forecast and then to a dynamic fair value, making it easy for anyone to understand the “why” behind a number. On Simply Wall St’s Community page, millions of investors use Narratives to share, test, and update their views, so you’re never limited to just one angle or Wall Street consensus.

Narratives help you decide whether to buy, sell, or hold by comparing your scenario’s fair value to Nintendo's current market price. They automatically update when big news or fresh earnings are reported, so your analysis stays relevant. For example, some investors believe Nintendo could be fairly valued at ¥7,612 per share with steady growth, while others see either much higher or lower prospects depending on how the next console performs.

Do you think there's more to the story for Nintendo? Create your own Narrative to let the Community know!

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.

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