Shares in the company are up less than 2pc this year
Nintendo has sat out the rally in tech stocks this year and may remain stuck in the doldrums until it unveils a successor to its Switch game console, which has seen sales declining over the past two years.
Shares of the fabled creator of Mario and Zelda are up less than 2pc this year while Sony Group has surged 20pc with help from an improved PlayStation outlook. Microsoft has gained 7pc despite a post-Covid slip in Xbox sales.
Earnings on Monday from Nintendo were expected to report a 5pc drop in operating profit to 240.3 billion yen (€1.7bn) for the quarter that ended on December 31. That would be its first year-on-year decline in the key holiday quarter since 2017, the year the Switch was introduced.
"I think sales of the Switch are entering a downtrend. I think that's why its share price has not risen much," said Hiroaki Tomori, chief fund manager at Mitsubishi UFJ Kokusai Asset Management. "If the sales of hardware products slow, the sales of software will inevitably also slow."
Sales of the company's flagship console have retreated from the peak of 28.8 million units in the financial year ended March 2021, when pandemic free time boosted demand for game machines.
In light of this decline, recent news that the company plans to increase production of the six-year-old product came as a surprise to market observers.
"The stock market does not believe Nintendo can increase Switch production," said Kenji Fukuyama, an analyst at UBS Securities Japan.
"This year is perceived to be a big limbo period in terms of the platform cycle – investors do not have high expectations for 2023-24 earnings."
The company will likely launch a new hardware product next year, he said.
Unlike its main rivals Sony and Microsoft, which have diverse operations in the tech and media fields, Nintendo shares are more of a pure play on video games.
The Switch maker is trading at about 13 times forward earnings, several points below Sony and 10 points lower than Microsoft.
While some investors may see Nintendo as undervalued given its rich content, the company's valuations come under pressure when its console shipments are seen peaking out, according to Mr Fukuyama.
The company's results for the latest quarter may also show a negative impact from the yen's rebound, he said, noting that a gain of one yen per dollar lowers the company's annual operating profit by three billion yen.
"Thinking in terms of catalysts for Nintendo, they aren't the stock you would choose now," Mr Tomori said.