Sony Group Corporation SONY has demonstrated considerable growth this year with its revenues increasing 10% in the first half. This has resulted in its share price appreciating 11.4% compared with the industry’s growth of 10.1% and the broader sector’s gain of 9.9% in the past year.
Price Performance
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SONY has the potential to sustain its growth trajectory in 2025 driven by momentum across the Game & Network Services (GN&S), Music, Entertainment, Technology & Services (ET&S) and Imaging & Sensing Solutions (I&SS) segments.
The GN&S business has proved to be a major driving force, with the maximum portion of revenues generated from this segment. Forex tailwinds and an uptick in sales of non-first-party game software titles, including add-on content, boost the prospects for the GN&S unit. Sony aims to expand its G&NS segment by increasing the installed base of PlayStation consoles, enhancing gaming experiences and diversifying into PCs while improving first-party software titles.
Starting in fiscal 2025, the company plans to release major single-player game titles annually. Sony has also raised its growth target for the segment. For this segment, revenues are now expected to be ¥4,490 billion compared with the earlier projection of ¥4,320 billion, owing to the positive impacts of forex rates.
With a digital-stream surge, Sony’s Music division is gaining healthy momentum. Driven by soaring revenues from live events, merchandising and licensing in Recorded Music and rising streaming revenues in Recorded Music and Music Publishing, the Music business is expected to witness higher sales in each quarter of 2025. The favorable impact of foreign exchange rates further cushions its success.
Expanding the subscriber base of Crunchyroll and strong sales of image sensors for mobile products are proving tailwinds for the Pictures and I&SS segments, respectively. Sony has been active in making strategic acquisitions, which could play a critical role in its growth momentum in 2025.
SONY's Key Strengths and Growth Drivers for 2025
The PlayStation brand continues to be one of the most dominant gaming consoles in the world. With the PS5’s strong performance in the market, Sony’s gaming segment remains robust. In September 2024, active users’ accounts on PlayStation were up 8% year over year, reaching 116 million. Total playtime for PlayStation users also increased 14%. Beginning with Ghost of Yotei, the highly anticipated sequel to the blockbuster Ghost of Tsushima, it plans to launch major single-player game titles annually starting next fiscal year.
In the Spotify Global Top 200, songs more than 10 years old grew from less than 5% in 2020 to over 20% by July 2024. This shift is driven by older users and younger listeners discovering past hits through social media. Sony is investing in evergreen music catalogs, which provide stable, long-term earnings from streaming and media use like movies and ads. It is also acquiring artists' name, image and likeness rights for some catalogs, unlocking new revenue streams like merchandising and live events.
Sony noted that the film It Ends with Us, released on Aug. 9, boosted its quarterly results. While recovering from the strikes, more major films like Bad Boys: Ride or Die (June) and Venom: The Last Dance (last month) have been released. Sony expects TV and streaming licensing revenues to improve from the second half of fiscal 2025. Sony has started streaming new anime titles from the fiscal second half, aiming to boost global anime fan engagement.
SONY's Sports Growth & Acquisitions Show Strong Potential
Though small in scale, the sports business offers steady profits, and Sony plans to focus on its expansion. The company is expanding its sports business by partnering with others and using technologies like Hawk-Eye for referee support. In August 2024, it partnered with the NFL to enhance sports technology. The collaboration aims to apply advanced sports tech like Hawk-Eye to improve referee decisions and measure game metrics more accurately. Sony acquired KinaTrax, Inc. in October 2024, to expand its sports data business into player performance. KinaTrax specializes in motion capture technology for sports. This tech is capable of assembling in-game biomechanical performance data on athletes. KinaTrax will be integrated with Sony’s Hawk-Eye Innovations Limited, the mainstay of Sony’s sports business.
The company has been on an acquisition spree to augment its portfolio and support its long-term goals. Sony Pictures Entertainment acquired a Texas-based Alamo Drafthouse Cinema theatrical exhibitor in June 2024. Alamo is a premium dine-in cinema chain that operates 41 theaters across the United States. It boasts a 4-million-strong loyalty member base, mostly the younger generation. Further, it plans to integrate Alamo and Crunchyroll with a focus on investments in games, music and anime, besides movies.
Final Thoughts
Though stiff competition and forex volatility remain concerns, strong performance across various sectors, especially G&NS, is likely to cushion SONY’s momentum going ahead. The company currently carries a Zacks Rank #2 (Buy) and a VGM Score of B, further assuring its solid growth potential. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 and a VGM Score of A or B offer solid investment opportunities. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Other Audio Video Production Stocks to Watch
Beyond Sony, investors may want to monitor these two stocks — Dolby Laboratories DLB and Sonos Inc. SONO.
Dolby Corporation: San Francisco-based Dolby Laboratories specializes in audio noise reduction and audio encoding/compression technologies to transform entertainment and communications at theaters, home, work and mobile devices. The company has a Zacks Rank #1. It has a Momentum Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 and a Momentum Score of A or B offer solid investment opportunities
The company delivered surprises in each of the last four quarters with the average beat being 15.37%. The Zacks Consensus Estimate for its current-year earnings is pegged at $4.05 per share, unchanged in the past 7 days.
Sonos.: Santa Barbara, CA-based Sonos is a consumer electronics company that is primarily involved in the manufacturing of speakers with immersive sound experiences.
Post the app redesign fiasco, SONO is looking to gain from the launch of new products in the global audio market ahead of the upcoming holiday season. In October 2024, Sonos launched the Arc Ultra, a premium soundbar with advanced technology, and Sub 4, an upgraded subwoofer for immersive bass. The company expects strong holiday demand for these products. Sonos’ foray into personal listening category with Sonos Ace, its first over-ear Bluetooth headphones, bodes well. Ace has boosted sales and is featured in 171 Best Buy stores, with plans to expand to 50 more in early 2025. However, subdued discretionary spending and increased promotional efforts may pressure Sonos’ margins.
The company has a Zacks Rank #3 (Hold). The company delivered an earnings surprise of 18.18% in the last reported quarter. The Zacks Consensus Estimate for its current-year earnings is pegged at 45 cents per share, unchanged in the past 30 days.
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