Nintendo has two main things working against it.
First, it is in Japan, known for sclerotic corporate governance.
Second, by mismanaging console cycles, they have had to build their user base from scratch each time. Therefore, Mr Market treats Nintendo’s cash flows as non recurring. Nintendo mismanaged console cycles by not encouraging compatibility and by not building a subscriber base. They would start from scratch each time. I believe they have recognized this mistake.
At some point in the future, the market will realize that Nintendo's cash flows are durable (and growing) and that the governance in Japan has shifted towards shareholders. Then Nintendo will be valued as a platform business, and thus not exposed to the hit driven vicissitudes of game makers, nor the poor economics of the console makers.
As of 9-30-24, Nintendo has 330MM Nintendo Accounts and 38MM Nintendo Switch Online subscribers. This sub is $20 a year, or a $760MM ARR stream. Nintendo’s market cap is about $65B. It is this revenue stream that I care about, and I am essentially paying a 85x multiple for it, and getting everything else (hardware sales, individual game title sales, and IP licensing) for free. Add the full business together, subtract the billions in cash, add back the zero dollars of debt and the LTM EV/EBIT multiple is 13. In general terms, this is a business that should be valued like a poor man's Apple.
A fully integrated video game business that controls the hardware, software, and IP is almost too good to be true. No one else in the world has a business like this.