Sony (NYSE:SNE) will hold its investor's day on Wednesday. Heading into this big event, I believe that the company will put a greater emphasis on Game and Network Services and its Entertainment segments. With eSports becoming a key growth driver for gaming in the medium term, SNE will try to leverage its strong PS4 install base as well as its game lineup to position itself for this trend. Additionally, PS Vue will likely be a focus area with the recent launch on Roku devices and I believe that PS Vue is well positioned for the cord-cutting trend in the US and the migration away from conventional cable boxes. With games, OTT product, music and movies being key growth drivers for SNE in the coming years, I remain bullish on the stock and recommend investors to accumulate as part of their long-term holdings.
SNE has certainly achieved success with the PS4 install base surpassing 40m units. Additionally, at the recent E3 the company impressed the crowd with several upcoming titles including God of War, The Last Guardian, Horizon: Zero Dawn and Spiderman. VR-focused titles such as Resident Evil 7, Batman Arkham and Star Wars also gained solid reviews across the board and a good pipeline can only add to margin upside in the next fiscal year, in my view. The overall trend in eSports is a positive for SNE given the increasing engagement and investment dollars into gaming. SNE is certainly a beneficiary from the hardware side as the PS4 has been outselling Xbox consistently over the past year. With a solid macro tailwind and a solid game lineup, it appears that SNE has a considerable runway for growth.
Besides gaming, PS Vue remains another key component of the overall PS ecosystem. I note that PS Vue is now available across the US starting for as little as $30/month and can be considered a cable replacement in that it delivers numerous TV channels and on-demand content. Given the current weakness with the basic cable trend that we witnessed last quarter, lower pricing, broader availability and strong PS4 sales momentum could potentially accelerate the cord cutting trend in the US. Equally important, the recent FCC ruling on cable set-top boxes is a positive for SNE in that it could drive broader adoption of third-party set-tops. Given that the video game console is evolving to become a comprehensive media home entertainment device, I see SNE as one of the beneficiaries.
Other segments such as music and movies could win some spotlights at the IR day. Music streaming will be a focus area and I'm positive at how SNE is looking to boost royalties and margins through its streaming services. On the studio side, there is still a lot to prove for the its film library, in my view. Although the animated series have done well, movies such as the Ghostbusters have yet to garner overwhelming success. Although I acknowledge that Warcraft has done pretty well, particularly in big markets such as China, consistent execution is still required in my view.
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