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What happened
Sony (NYSE: SNE) Equities largely outperformed the market in 2018, thanks to a series of rather encouraging earnings reports helping the company to record double-digit gains in a year otherwise characterized by volatility in technology stocks. The company's gaming, financial services and music divisions have been the main sources of its strong performance since the beginning of the year, but improvements have also been seen in other key segments.
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The Sony PlayStation 4 console, which has just entered its sixth year of market activity, has delivered excellent hardware sales and a product ecosystem that also generates strong software and software sales. recurring revenues through subscriptions to online services. Although the performance of the company's television and mobile business remains uninteresting, gaming and financial services provide a solid foundation for the company. The imaging sector also has great potential, and the company's film division, which has been struggling for a long time, is showing signs of recovery.
Source of the image: Sony.
So what
The year 2018 has been a huge year for Sony's PlayStation division. Games like God of the war and Spider Man This year's last title was a record for the company's best-selling in-house game. It's quite an achievement if we consider that the company has been creating games for more than two decades and that the competing offers are more numerous than ever on the market. These good results helped the Sony stock to reach a ten-year high at the end of September. Shares sold as a result of a downturn hit the entire market in October and lost ground in November, despite the company's impressive second quarter results.
On October 30, Sony released its second quarter results, posting a solid performance and raising its guidance for the year. The company's September quarter saw a 27% year-over-year increase and a 65% increase in operating profit for the network games and services segment. These helped push total revenues up 6% over the prior year and operating profit by 17%. Sony is now gearing up for sales in its games segment to grow by 15% this year, largely due to Spider Man and God of the war.
Sony's film division, underperforming in recent years and in a sector of activity that is still not fully exploiting its potential, is also showing signs of recovery. The film sector posted second-quarter profit of $ 209 million, a substantial increase over the $ 68 million recorded in the second quarter of last year and the $ 68 million loss recorded in the first quarter. quarter of this year.
The company's film business was a resounding success. Venom in October, an emanation of Spider Man a franchise is on track to earn more than $ 700 million in ticket sales. Hotel Transylvania 3: summer holidays also scared $ 525 million at the box office this year. On the heels of last year Jumanji: Welcome to the jungle nearly $ 1 billion in ticket sales and the successful reintroduction of the Spider Man franchise, the film wing of Sony looks stronger than in years.
Now what
The PlayStation 4 has been a huge success for Sony, but the life cycle of its product has occurred during which the company is working to replace it in order to market it in the not too distant future. Sony's game brand is strong, but investors should understand that the company could lose its dominant position in the field of gaming equipment with the next generation of hardware.
In addition to competing with a new Xbox platform Microsoft, there are also indications that Alphabet could launch a streaming-focused gaming platform in the not-too-distant future. Sony also has an extensive collection of video game franchises and development studios. Thus, the company's game empire may collapse overnight if its next platform does not match the success of the PS4. However, online subscription activities, revenues from the sale of third-party console licenses, and other benefits of owning a hardware platform have contributed significantly to the good performance of its hardware platform. division of games in recent years.
The game has become the heart of Sony's business, but it also offers growth opportunities elsewhere. The company is focusing more on its music business given the stronger prospects for growth in streaming services, and has just signed a $ 2.3 billion contract to acquire an additional 60% stake in EMI Music Publishing. , which allows him to hold his full participation. at 90%. The company is also seeing increasing demand for its image sensors over the next few years, as more and more camera components are integrated with smartphones. In the longer term, Sony's expertise in imaging technology gives it a great opportunity to provide sensor components for smart cars and robotics systems based on computer vision.
The company's overall outperformance during its first two quarters and the recent acquisition of EMI prompted the company to raise its operating target for the current year to $ 7.7 billion, up 30% from to the goal published in July.
Suzanne Frey, a member of the Alphabet Executive, is a member of The Motley Fool's board of directors. Teresa Kersten, a LinkedIn employee, a subsidiary of Microsoft, is a board member of The Motley Fool. Keith Noonan does not own any of the shares mentioned. Motley Fool owns shares and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool owns shares of Microsoft. Motley Fool has a disclosure policy.
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