The "metaverse," which blurs the lines between the physical and digital worlds, has become a hot topic over the past year. Facebook's rebranding as Meta Platforms (META 0.11%) -- which reflected its focus on that market -- also caused more companies to jump aboard the buzzword bandwagon.

The exact definition of the metaverse continues to evolve, but it mainly focuses on the convergence of augmented (AR) and virtual (VR) reality technologies. Digital payments, cryptocurrencies, and non-fungible tokens (NFTs) could also be used to fund new economic ecosystems within these virtual worlds.

Meta and Roblox (RBLX -1.18%) are both considered promising plays on the metaverse. However, one tech giant which is often overlooked in those conversations is Nintendo (NTDOY 1.13%), which already owns all the building blocks for a massive metaverse business. Here are four reasons why Nintendo could be a great metaverse stock.

Nintendo characters Mario and Luigi.

Image source: Nintendo.

1. An audience of nearly 100 million gamers

Nintendo has shipped 97.3 million Switch consoles since March 2017. Unlike Sony's PS5 and Microsoft's Xbox Series X consoles, the Switch is a hybrid device that can be easily converted between home console and handheld modes.

The Switch's handheld form factor makes it an ideal platform for launching casual multiplayer games which aren't tied to a PC or home console. The Switch can also be converted into a VR headset with its $80 Labo kit.

Meta has reportedly shipped about 10 million Oculus Quest 2 VR headsets over the past year. That makes it the best-selling stand-alone VR headset in the world, but it still has a much smaller audience than the Nintendo Switch. Nintendo's existing user base is truly massive.

2. Animal Crossing is its killer metaverse app

Animal Crossing: New Horizons, launched last March, became a hit online game during the pandemic. In the game's virtual world, players can explore an island, build a home, complete tasks to earn an in-game currency, customize their animal avatars, and socialize with other players.

In other words, Animal Crossing: New Horizons is already a stand-alone metaverse that should be mentioned in the same breath as Roblox's games and Meta's Horizon Worlds. Nintendo has shipped nearly 35 million copies of the game as of Sept. 30, which suggests its ecosystem could already be comparable to Roblox's audience of nearly 50 million daily active users.

3. Pokémon Go and Pikmin Bloom

Pokémon Go, developed and published by Niantic via a collaboration with Nintendo and its affiliate The Pokémon Company, became one of the first hit metaverse games after its launch five years ago.

In late October, Niantic released Pikmin Bloom, a new AR title based on Nintendo's flower-based strategy game. Like Pokémon Go, Pikmin Bloom encourages players to walk outside. But instead of catching Pokémon, players plant virtual flowers across a shared map.

Pikmin Bloom probably won't become the next Pokémon Go, but it highlights Nintendo's ability to transform its franchises into AR experiences for the metaverse. Its outdoor, gamified fitness approach also represents a stark contrast to the enclosed digital worlds of the Oculus Quest and Roblox.

4. Super Nintendo World

Nintendo has been working with Comcast's (CMCSA -0.37%) NBCUniversal to develop Super Nintendo World areas for its Universal Studios theme parks. It opened its first location in Japan this year, and it will add this new area to its parks in California, Florida, and Singapore in the near future.

Super Nintendo World is already packed with AR features. Its Mario Kart attraction allows visitors to fire shells at digital obstacles while driving around a real track, and visitors can collect coins, stamps, and power-ups around the park with a wristband that is synchronized to a mobile app.

If Nintendo expands these technologies outside of its theme parks in the near future, it could establish a head start against Meta, Roblox, and other tech companies in terms of real-world applications for metaverse technologies.

Will these catalysts move the needle?

Nintendo's long-term strengths in the metaverse probably won't offset its near-term challenges, including supply chain constraints for the Switch and tough year-over-year comparisons in a post-pandemic market.

However, Nintendo's stock is also cheap at less than 16 times forward earnings and four times this year's sales. Those low valuations compare favorably to the much higher multiples of Meta and Roblox. The reasonable pricing should limit Nintendo's downside potential and make it a compelling value play until it resolves its near-term challenges. As Nintendo's business recovers and its metaverse strengths become more apparent, it should attract more growth-oriented investors.