With the reveal of its PlayStation 5 console on June 11, 2020, Sony (NYSE:SNE) managed to grab investors’ attention again. This comes after a relatively dull period for Sony stock, where it was lost in the conversation about gaming stocks. Instead, companies like Activation-Blizzard (NASDAQ:ATVI) and Take-Two Interactive (NASDAQ:TTWO) have been stealing the spotlight.
After all, the enduring success of mega-hit games like those in the Call of Duty and Red Dead franchises is almost impossible for most investors to ignore. This is especially true considering that sales in gaming are breaking countless records during the novel coronavirus pandemic.
Why? Well, more people are jumping back into the gaming world while under quarantine, which has led to widespread success for many gaming stocks this year. NPD Group reported that total video game sales in May 2020 were up 52% compared to the same month in 2019. If you just look at software, the increase jumps to 67%.
But any time Sony, Microsoft (NASDAQ:MSFT) or Nintendo (OTCMKTS:NTDOY) make an announcement about a new console, they manage to regain gamers’ — and investors’ — attention. After all, gamers need those platforms in order to enjoy many of the games that those other companies produce.
Add to that the fact that each of these companies also produces their own, exclusive line of video games for their respective console and there’s plenty of reason to justify the hype. Sony stock might not be powered by franchises like Call of Duty, but the company still has plenty of notable names under its mantle. New titles will undoubtedly lure hardcore and casual gamers alike.
Are Gaming Stocks the Cure to Coronavirus Uncertainties?
With all of that said, the real question is not “will the release of the PlayStation 5 impact the price of Sony’s stock,” but rather, “how significant will the impact be?” This is a particularly compelling question in light of the broad impact of the new coronavirus.
As alluded to earlier, the strength of the gaming industry is much less questionable than others, since it has managed to thrive in this period of great uncertainty. That’s somewhat unsurprising. Gaming by its very nature encourages socially distanced entertainment. There are exceptions — like couch co-op games, for example — but broadly speaking, most gamers can enjoy the activity without the looming “threat” of getting too close to another human being.
For many, myself included, the gaming hobby has offered a platform for long-lasting entertainment and worry-free socialization during the pandemic. This is the perfect industry and product to support in a world that hasn’t yet developed a vaccine for Covid-19, the disease caused by the new coronavirus. And while there are many concerns about the greater economic impact of the pandemic, many analysts have touted video games’ “recession resistance.” Some of these assessments were prior to the pandemic, but it isn’t likely to change, given the impressive post-Covid-19 sales numbers outlined above.
Also consider other variables like the prospect of a second wave of the coronavirus, and investing with confidence is increasingly more difficult. But that’s not the case with gaming stocks. There’s plenty of reason for continued optimism. That doesn’t even factor in other catalysts, like the rise of esports — NewZoo expects esports revenue to break the $1 billion threshold in the very near future. While, this might be delayed a bit until socialization is back to some sort of normal, it will still have an impact on the industry in the years to come.
What all of this translates into for Sony stock is additional reason for bullishness on pre-existing catalysts.
Sony Could Power Higher Despite Economic Downturn
Prior to the new virus, many investors had already considered the case for a run-up in Sony stock from the PlayStation 5 release. But with the virus in the mix, I think the success of Sony’s new product is even more guaranteed. It could even be amplified by this black swan event.
Given that gaming has demonstrated prior endurance during economic hardships, it’s logical to assume that the impact of the coronavirus will not be detrimental to the industry in the long-term, even if the long-lasting economic impact of the virus is significant. This position gains further strength when you consider the overwhelming sales and increase in gaming worldwide during the pandemic so far.
Assuming that Sony prices its PlayStation 5 product affordably (some expect it to be between $400 to $500), there’s no doubt that many gamers — both new and returning — will be interested in picking it up this holiday season. While the impressive boost in new gamers worldwide will likely diminish somewhat if coronavirus concerns dissipate, there’s also a good chance that many will retain their interest in the hobby. After all, it will take more than a couple of months for us to figure out what the “new normal” will truly entail.
The possible boost from the coronavirus should be even more significant if quarantines or social-distancing rules or habits endure for longer than expected due to a second wave of Covid-19 infections.
Accordingly, while the inevitable release of the PlayStation 5 might have already been baked into the price of Sony’s stock months ago, there might be even more room for it to run than previously anticipated. This is both due to the impact of the coronavirus and whatever news comes following the console’s reveal on June 11.
The Bottom Line for Sony Stock
Although I do not suggest that everyone go out and buy Sony stock immediately because of its impressive console reveal last week, there are now plenty of reasons to keep a close eye on the stock. This is especially true when you factor in how the coronavirus crisis may amplify its position as a leader in entertainment over the next few months leading up to its console release.
But I don’t think that possible coronavirus-induced tailwinds are the only reason to justify investors’ attention. Before the coronavirus hit, there were plenty of reasons to be hyped about Sony stock in 2020. After all, Sony is backed by more than just its PlayStation 5 console and exclusive video games.
However, the primary interest for many remains its prospects in gaming. And these prospects are undeniably more appealing in the post-coronavirus world, where the gaming industry has demonstrated its impressive staying power.
Sony will face intense competition from the other leaders in the gaming world like Microsoft and Nintendo when they release their new consoles, each of which are also expected later this year. And there are some newcomers to consider too, like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) with its Stadia streaming platform. As such, it would be a mistake to say the path ahead for Sony is easy.
But there’s certainly even more room for excitement than before.
Robert Waldo has been a web editor for InvestorPlace.com since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.
