Sony Group (NYSE: SONY) lags slightly behind the S&P 500 Index in 2021. However, after flirting with negative for the year, SNE stock has recovered well. Since August 19, the stock is up 21% and as the holiday season approaches, the rally could have some legs.
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I know summer just turned into fall, but that only means the holidays will be here before you know it. I’m not trying to rush the season, but isn’t it Vice President Kamala Harris who suggested Americans jump early in their holiday shopping? The vice president was referring to supply chain challenges that are expected to persist until 2022.
However, some consumers are still trying to fulfill the wish lists of the last holiday season. And one of those items is the Sony PlayStation 5. Last year was supposed to be a big year for game consoles. However, it was around this time that consumers began to realize that despite the successful release of the Apple (NASDAQ: AAPL), demand for semiconductor chips would exceed supply.
That’s not to say that Sony didn’t sell any PlayStation in 2020. In fact, the company sold 4.5 million PlayStation 5 consoles in the quarter ended December 31. And the company’s Game and Network Services division’s total revenue in the third fiscal quarter was $ 8.4 billion. This represented about a third of the company’s quarterly revenue.
But if the recent store deposit PlayStation 5 at several retailers is an indication, demand remains strong. And that should bode well for the company’s revenue and profits over the next few quarters.
What is Zee?
If the question is, which company could make Sony a legitimate challenger for Disney (NYSE: DIS) in India the answer is Zee. This brings us to another part of Sony’s business, Sony Music. The Japan-based company is looking to inject $ 1.6 billion in growth capital into a business unit in the United States while it needs a majority stake in Zee.
According to insiders, the deal will improve the new company’s digital platforms and allow it to bid for the rights to broadcast live sports. A former Disney executive speaking on condition of anonymity said the merger could be the first viable challenge for Disney in the Indian market.
And there are good reasons Sony is looking to enter this market. KPMG accountants estimate that the TV entertainment industry was worth $ 10.5 billion in 2020. Sony Music accounted for about 11% of the company’s revenue in the last quarter.
The deal is expected to close in late 2021, which could be another catalyst for the title.
The rest of the business is getting back to shape
So far, I have only covered two business units which represent around 40% of the company’s turnover. The remainder of the revenue comes from three other business units: Electronic Products and Solutions, Imaging and Sensing Solutions, and Financial Services.
In 2020, the company’s games and music business outpaced the growth of its core businesses. So far in 2021, the scenario is reversed and this is what should intrigue investors. As the core business of the company comes back online, it should still benefit from some growth in other activities.
Wait for confirmation
During this recent surge, SONY stock appears to form a higher support level which is the 20-day moving average crossing significantly above the 50-day moving average. But the stock appears to be near an overbought level. Investors should look for a pullback in the stock before buying it at these levels.