We recently compiled a list of the 7 most profitable gaming stocks to invest in. In this article, we’ll take a look at where Sony Group Inc. (NYSE:SONY) ranks among the most profitable gaming stocks to invest in.
The evolution of gaming: Key trends shaping the market
The gaming industry is currently experiencing significant changes due to evolving technology and consumer preferences. One of the most notable trends is the integration of artificial intelligence (AI) to transform game development and player experience. AI is used to enhance gameplay by creating more realistic environments and adapting to individual player styles. We discuss this in more detail in a short excerpt from our previous article, 7 Best Gaming Stocks to Buy Now.
“According to Bernard Marr, a world-renowned futurist and author of Generative AI in Practice: 100+ Amazing Ways Generative Artificial Intelligence is Changing Business and Society, generative AI is an attractive technology for developers. Generative AI is revolutionizing video game development by providing tools that allow developers to create unique content, realistic visuals, and immersive gameplay experiences through procedural generation. We believe it can help create unique gaming environments and enable dynamic gameplay experiences that change from session to session.”
Another big trend in the gaming market is the rise of microtransactions, especially in free-to-play games. This monetization model is becoming increasingly popular as developers seek sustainable revenue sources.
On March 24, CNBC reported that the two largest U.S. video game companies, Electronic Arts and Take-Two Interactive, are increasingly relying on live service games, subscriptions, and in-game purchases for revenue. Microtransactions, which allow players to purchase virtual items and features in games using real money, have become an important source of revenue. Popular titles like Fortnite, Call of Duty: Warzone, and Clash Royale utilize this model, with players paying for ongoing updates and seasonal content through subscriptions and battle passes.
Mat Piscatella, Circana’s executive director of video games, said the industry is moving toward a “battle pass” system that packages seasonal content in a way that players find valuable. This approach has led to a more positive response from gamers as they feel they are getting consistent value for their money. This trend shows that game publishers need to continually provide players with new content to maintain interest in these live service games.
According to Comscore’s 2024 State of Gaming Report, approximately 82% of American gamers made in-game purchases in freemium games in 2023. The report also highlights that 62% of adults over the age of 18 participate in gaming activities, demonstrating the growing appeal of video games around the world. different age groups.
Esports are becoming increasingly popular, especially among younger viewers. According to the report, 86% of Gen Z and 80% of Millennials watched esports last year. Furthermore, 53% of Gen Z and 61% of Millennials consume esports content, highlighting the growing popularity of competitive gaming among these age groups.
methodology
To create a list of the 7 most profitable gaming stocks to invest in, we used Finviz and Yahoo’s stock screening tools to find the largest gaming companies. We also reviewed our own rankings, vetted ETFs, and consulted various online resources.
Next, we focused on profitability. From this initial list of over 20 gaming companies, we narrowed our selection to stocks with positive trailing twelve month (TTM) net income and positive net income growth over the past five years. .
To ensure the reliability of our findings, we consulted reliable sources such as SeekingAlpha, which provides insights on net income CAGR over the past five years, and YCharts, which provides information on TTM net income.
Finally, from our list of most profitable stocks that meet our criteria, we focused on the top 7 stocks that are most favored by institutional investors. Data on hedge fund sentiment surrounding each stock was obtained from Insider Monkey’s database of 912 elite hedge funds. The 7 most profitable gaming stocks to invest in are ranked below in ascending order based on the number of hedge funds that own the stock as of Q2 2024.
Why do we care what hedge funds do? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
Sony Group Corporation (NYSE:SONY)
TTM Net Income: $6.61 billion
5-year net profit CAGR: 3.18%
Number of hedge fund holders: 29 people
Sony Group Corporation (NYSE:SONY) is a multinational corporation representing Japan. It is known for its strong presence in the gaming industry through its subsidiary Sony Interactive Entertainment. The company’s PlayStation brand has become iconic, attracting a loyal fan base with successful gaming consoles such as the PlayStation 4 and PlayStation 5. As of June 2024, Sony reported 116 million monthly active PlayStation accounts, reflecting a 7% year-over-year increase and 8% increase in total play time .
The company’s gaming division continues to grow, even though it hasn’t released any new titles recently. With PlayStation 5’s growing user base and popular games like Helldivers 2 and Ghost of Tsushima on PC, engagement remains high. Upcoming releases such as PC live service games Concord and God of War Ragnarok are expected to further increase player interest. In the first quarter of fiscal year 2024, which ended June 30, 2024, Sony’s network services revenue increased by a significant 13%, driven by premium services such as PlayStation Plus.
In September, Sony Group Corporation (NYSE:SONY) announced the PlayStation 5 Pro, scheduled to be released on November 7, 2024. This upgraded console features enhanced graphics capabilities with a more powerful GPU for better performance and smoother gameplay. With improvements like advanced ray tracing and AI-driven upscaling, PS5 Pro promises an exceptional gaming experience.
Sony Group Inc. (NYSE:SONY), one of the most profitable stocks in the gaming industry, had net income of $6.61 billion for the trailing twelve months ending June 30, 2024.
Analysts are bullish on Sony. Analysts currently maintain a consensus buy rating on the stock, and their median one-year price target of $22.63 indicates a potential upside of 21% from current levels. There is.
Overall, SONY represents a strong investment opportunity in the gaming space. With a solid lineup of exclusive games and continued innovation in hardware, the company is well-positioned to expand its presence in the market.
According to Insider Monkey’s Q2 2024 database of 912 elite hedge funds, 29 hedge funds held shares in Sony Group Corporation (NYSE:SONY).
Sony ranks fifth overall on our list of the most profitable gaming stocks to invest in. While we see the potential in gaming companies, we believe AI stocks have a better chance of delivering higher returns in a shorter period of time. frame. If you’re looking for AI stocks with more promise than Sony, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: 15 humanoid robot stocks to buy, according to Morgan Stanley and Jim Cramer, says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article originally appeared on Insider Monkey.
