Back to top

Image: Bigstock

SONY to Reportedly Accelerate R&D Spend for Gaming Division

Read MoreHide Full Article

SONY Corporation (SONY - Free Report) is looking to boost research & development spending for its gaming division per a report from Nikkei Asia.

Reportedly, SONY will be investing ¥300 billion which is equivalent to $2.13 billion in to R&D for the fiscal year ending on Mar 31, 2024. The company is gearing to expand reach in the live service games and the upcoming “extended reality” market.

Its gaming business is primarily centered around the sale of PlayStation hardware. Now, it is looking to capitalize on the lucrative opportunity presented by live services games and the sale of add-ons for titles. This ramp up in R&D spending stems from the company’s shift to a subscription-based model, added the report.

The report further highlighted that SONY expects market for add-on style games to become a $19 billion opportunity in 2026. Notably, for the first time, this figure will exceed the market for hardware like PlayStation. SONY’s acquisition of Bungie will aid it in expanding its live game expertise. The company is expected to add 12 live game titles to its portfolio by March 2026, noted Nikkei Asia.

As far as extended reality is concerned, SONY will be pooling together all resources from its nine acquired/ invested studios over the past two years including prominent Epic Games Studio.

SONY’s increase in R&D spend is directed towards retaining its market share in the gaming market amid an evolving landscape. Its gaming segment is the largest contributor to the top line. In the last fiscal year, the segment generated revenues of ¥3,644.6 billion, up 33% on a year-over-year basis and representing 31.6% of total revenues. In the fiscal year, the company sold 19.1 million units of Play Station 5. The company now expects to sell more than 25 million units of its PlayStation 5 in the current year.

For the current year, SONY expects revenues from this particular segment to be ¥3,900 billion. However, the company expects sales of ¥11,500 billion for fiscal 2023, down 0.3% year over year owing to weakness in the Entertainment, Technology & Services and Financial Services segments’ sales.

At present SONY carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better ranked stocks in the broader technology space are Woodward (WWD - Free Report) , Watts Water Technologies (WTS - Free Report) and Blackbaud (BLKB - Free Report) . Watts Water Sports a Zacks Rank #1 (Strong Buy) while Woodward and Blackbaud carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Woodward’s fiscal 2023 earnings has increased 0.3% in the past 60 days to $3.59 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of WWD have risen 34.6% in the past year.

The consensus mark for Watts Water’s 2023 earnings is pegged at $7.27 per share, up 1.1% in the past 60 days. The long-term earnings growth rate is anticipated to be 8%.

Watts Water’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 16.3%. Shares of WTS have increased 49.4% in the past year.

The consensus estimate for Blackbaud’s 2023 earnings is pegged at $3.75 per share, up 1.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 21.9%.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 10.4%. Shares of BLKB have improved 35.1% in the past year.

Published in