Here’s what Wall Street analysts expect from Nintendo's earnings on Thursday

Published Tue, Nov 2 20217:47 PM EDTUpdated Wed, Nov 3 20218:12 PM EDT

Japanese gaming icon Nintendo is set to announce its quarterly earnings on Thursday, and analysts from firms including JPMorgan and Jefferies appear mixed on the company's outlook. Nintendo was one of the beneficiaries of prolonged Covid lockdowns last year, when consumers looked toward video games as a salve amid an unprecedented global public health crisis that left millions trapped in their homes for months. After soaring nearly 50% in 2020, Nintendo shares in Japan saw a dramatic decline this year, falling about 24% in 2021 as of Tuesday's close. Nintendo's earnings release comes as questions surround the company's ability to sustain the strong momentum it garnered in 2020. In July, Nintendo launched a new variant of its flagship Switch console , with features such as a brighter and more colorful OLED screen — but it lacked other details such as support for ultra-high resolution content. Here's what the pros are saying about Nintendo ahead of its earnings report: Morningstar The biggest focus for this quarter will be on Nintendo's hardware shipments, Morningstar analyst Kazunori Ito told CNBC in a phone call. Nintendo's hardware shipments appear to be starting to slow compared to the previous year. While the slowdown in hardware sales this year was expected by most, given last year's strong demand due to the pandemic, Ito said: "It seems the pace of the slowdown is maybe more significant than people had expected." Still, he expressed confidence in Nintendo's game pipeline for the upcoming holiday season and in 2022, describing it as "very attractive." "We'll see the stable profitability in the next fiscal year," Ito said. "The game shipment in ... fiscal or calendar 2022 will be quite solid." JPMorgan Nintendo's stock price "looks very attractively valued" given its earnings stability, JPMorgan Securities Japan's Haruka Mori said in a Oct. 6 note. "We will be watching hardware shipments ahead of the year-end holiday sales season as sales have been affected by the chip shortage," Mori said. She was referring to the ongoing global chip crunch that has affected many other industries such as automobiles. Citing Nintendo's strong software sales by volume in the first quarter, she said: "We see no need to be pessimistic about FY2022 earnings and think they will increase again because of growth in new releases in FY2022, while user activity holds up to some extent." Morgan Stanley Morgan Stanley recently named Nintendo as one of a number of companies that will "likely share price negative results" in earnings. "Main risks for Nintendo include a YoY profit decline in 2Q, and the possibility it could lower its full-year hardware sales targets due to chip shortages and shift in demand toward OLED models," said Masahiro Ono, equity analyst at Morgan Stanley MUFG Securities. Still, Ono said Nintendo's strong software pipeline is expected to help support profit growth in the months ahead. However, he warned that "consensus expectations are high and the share price could weaken in the near term." Jefferies Meanwhile, Jefferies on Oct. 19 downgraded Nintendo from a "hold" rating to "underperform." That means it sees the stock providing a total return of minus 10% or less within a 12-month period. "We believe current consensus estimates are too high and create downside risks for the stock," said Jefferies' Atul Goyal and Shingo Ito. They cited data from Japan which showed that weekly sales volume for Nintendo's Switch console declined all year round in the country. "That could well be a Japan-only issue or could be a global trend. Based on 1Q results, it does not seem like a Japan-only issue though," the analysts said. "In Jul-Sep'21 [2Q], we note the decline has accelerated. If this trend is indeed global, we do not believe that 2Q [operating profit] can rise from 1Q to 2Q," they said.

Nintendo game character Mario is seen at a new Nintendo store during a press preview in Tokyo on November 19, 2019.

Behrouz Mehri | AFP via Getty Images

Japanese gaming icon Nintendo is set to announce its quarterly earnings on Thursday, and analysts from firms including JPMorgan and Jefferies appear mixed on the company's outlook.

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