What's going on?
Shares of Japanese tech company Sony fell 8% on Monday after it reported a weaker-than-forecast quarterly update late on Friday, leaving some investors looking for the reset button.
What does this mean?
Sony’s spent years shifting its business away from selling televisions, aiming to become a more profitable “entertainment” company. Indeed, its purchase of EMI Music Publishing last year made it the world’s largest music publisher. But slow hardware sales left Sony feeling the pinch once again, missing investors’ profit expectations for the last quarter. At age six, Sony reckons the PlayStation 4’s in its golden years – perhaps worrying investors, but whetting the appetite of consumers looking forward to the PlayStation 5.
Why should I care?
For markets: Investors aren’t playing with gaming stocks.
As well as selling off Sony’s shares, investors ditched rival Nintendo’s stock too. Late last week, Super Mario’s maker announced a better-than-expected quarterly profit. But, as some analysts predicted in November, the company said it wouldn’t sell as many units of its latest console as it previously thought – and that sales of its older handheld console would be lower than expected, too, as it faces the same age-related challenge as Sony’s PlayStation 4. Sony can somewhat fall back on subscription revenue from its PlayStation Network (which, in 2018, eclipsed Nintendo’s entire revenue) – but Nintendo can’t. It’s not taking nearly as much advantage of the rising amount of time (and money) people spend gaming.
Zooming out: Looking west to China.
According to the Institute of International Finance, international investors bought some $9 billion worth of Chinese stocks in January – the most ever in a single month. Investors might be anticipating Chinese government support (to boost the country’s slowing economic growth) will have a positive effect – as it did back in 2015 and 2016. And, with US trade negotiations seemingly headed in the right direction, Chinese stocks may be in for another boost. That would be a Happy New Year indeed 🇨🇳