You might say that Japanese technology giant Sony (NYSE:SNE) stock is a bit of a slow grower. Most major consumer-tech firms, including Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), performed strongly out of the gate in 2019. Sony stock? It spent the first three months of this year testing investors’ patience.
However, those troubles and miscues seem to have resolved themselves. On April 1, SNE stock was staring at near-double digit losses. But since that day, shares have absolutely soared, gaining almost 22%. Even after the overall market’s stumble this week, SNE stock is still in the black for the year to the tune of about 2%.
Of course, this is nothing compared to its top-dog rivals. Apple has gained 30% year-to-date. Microsoft is no slouch either, up 25%. But Sony stock levers something these other two companies don’t: the almighty PlayStation video-game console.
Late last week, the on-again, off-again tech firm released the first details about its next-generation console. If management keeps to its naming convention, it will be called the PlayStation 5, or PS5. However, SNE has done some strange things in the past, so the name is no guarantee.
But what is almost guaranteed is that the PS5 will be a game-changer for Sony stock. Over the years, management has made significant investments into their entertainment umbrella. The PS5 represents the culmination of these (expensive) efforts.
Specifically, here are three reasons why you can bank on SNE stock and the upcoming PS5, or whatever it will be called:
Sony’s New Gaming System Is Loaded with Tech
Every PlayStation console represented a leap forward in gaming visuals. Back when the PS3 came out, people marveled at the life-like graphics. When Sony launched the successor PS4, the line between virtual reality and actual reality became all the more blurred.
Sometimes, when I quickly glance at a PS4 screenshot, I can’t tell whether I’m looking at a video game or a real-life broadcast. The PS5 promises to push the bar even higher. SNE confirmed that this latest gaming hardware will utilize chips from Advanced Micro Devices (NASDAQ:AMD). Specifically, we’re talking about a CPU based on third-gen Ryzen, and eight cores of the Zen 2 seven-nanometer microchip.
Given the massive sales success of the PS4, I think we’ll see dramatic metrics for the successor. Therefore, don’t be surprised to see Sony stock jump around the release date.
Furthermore, one of the biggest differences for the next-gen PlayStation is that it will incorporate a solid-state drive. Currently, Sony’s consoles integrate traditional hard drives, which have improved dramatically over the years. However, they’re incredibly slow in this age of ultra-fast response rates.
Although I love my PS4, I don’t care for the several seconds I must wait for my game to transition from one major section to another. A solid-state drive, which features no moving parts, gets to the data much quicker than a regular hard drive.
Of course, a solid-state drive costs significantly more than its counterpart. Management wants to keep the PS5 reasonably priced, so we’ll see how that goes. However, I don’t think consumers will mind paying more for a quicker platform.
Content Umbrella Favors Sony Stock
You don’t have to be an entertainment-media expert to recognize the growing trend in consolidation. Earlier, market pundits debated the wisdom of AT&T (NYSE:T) expensively acquiring Time Warner. Next, analysts shined the spotlight on Disney (NYSE:DIS) and its bid for Fox’s (NASDAQ:FOXA) entertainment assets.
Conservative investors didn’t like that these big but vulnerable corporations were buying out others like them. Instead, they should have focused on shoring up their financials and building steady value for their shareholders.
I appreciate this perspective. That said, I also appreciate that the nature of entertainment has changed, particularly with streaming companies like Netflix (NASDAQ:NFLX). Today, it’s more important than ever to deliver content that attracts both eyeballs and revenue-conversion opportunities. If you have good content, you can win despite the platform.
Sony understands this entertainment trend better than most, which is why I trust SNE stock. They invested heavily into their own exclusive content umbrella. Observing these expenditures from the outside may lead you to believe that SNE is wasting money. Instead, what they’re really doing is securing viable, lucrative synergies.
One of the best ways they can leverage their entertainment portfolio is through PlayStation-exclusive titles. Here’s the thing: other rivals also have exclusives. What makes Sony, and by logical deduction SNE stock distinct, though, is demand: people actually want to play Sony-only games. They’re more than willing to fork over money for a new console to do so.
Just look at the roaring success for Marvel’s Spider-Man. Such massive inflows are only possible through leveraging popular branded content. While the initial investments were expensive, the potential for the PS5 to bring it all together is truly colossal.
In other words, keep a very close eye on Sony stock.
No Comparable Competition for SNE Stock
I’m a PlayStation guy for life. I don’t think I can ever get used to the Xbox’s strangely-shaped controls. They look like PS controls that were left in the microwave for some unknown reason.
Of course, I’m incredibly biased as well. InvestorPlace readers may know me as that guy who worked for Sony. Naturally, I own Sony stock, so I have a vested interest in their continued upward trajectory.
But even acknowledging that I’m not 100% objective, I don’t think the company has comparable rivals in the gaming sector. I may tick off the Xbox folks, but the data confirms it. The PS4 is approaching the 100 million units sold mark. Although Microsoft doesn’t break down Xbox figures, they’re more or less approaching the 50 million threshold.
But what about video-game streaming? Although streaming certainly has an impact on the broader gaming industry, I think this is an apples-to-oranges comparison. At least, that’s the view when discussing SNE stock and the next-gen PlayStation.
Streaming is designed to capture the very casual gamer. But for those that want the absolute best in visuals and experience, no substitute for a dedicated console exists. Briefly, we went over the tech that SNE will integrate into the PS5. To stream all that data would be a gargantuan undertaking.
Plus, game-streaming competitors like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) don’t have content credibility. They’re new to the game, and they can’t whip out highly-desirable exclusives. Until they can climb these sharply vertical obstacles, your best bet in gaming is Sony stock.
As of this writing, Josh Enomoto is long SNE stock and T stock.