As talk of an ensuing recession looms over markets, investors may be looking for industries and stocks that could withstand a downturn. The answer to these problems may lie in the stocks of video game companies.
The video game industry experienced double-digit growth during the downturns of 2001, 2008, and 2009. Consumers seem to flock to video games during recessions because they are a cheaper form of entertainment.
Among video game stocks, tech giant Sony (NYSE:SONY) stands out as the largest video game console company and largest video game publisher. At the same time, the company also recently received a Upgrade by Macquarie’s Damian Thong on Friday, July 8.
Moreover, in their last Press releasethe company reported a 1.2% year-on-year (YoY) increase in net revenue to 2.264 billion yen (~$16.46 billion), with earnings per share (EPS) topping expectations at ¥88.98 (~$0.65).
Additionally, the company raised its full-year forecast, expecting sales to rise to 11.4 trillion yen (~82.8 billion) from previous expectations of 9.9 trillion yen. (~$71.9 billion).
Chart and Analysis SONY
Notably, year-to-date (YTD) stocks are down more than 34%, potentially providing a solid entry for long-term investors, despite the negative trend for SONY.
Prices have been consolidating lately and volatility has been reduced with a support line formed at $81.68, while the resistance line settled at $82.74.
Comparatively, analysts are pricing the stock as a moderate buy, predicting the average price the stock could reach over the next 12 months is $125, 52.05% higher than the current price of $82.21, as they also see more room to maneuver in this lackluster market.
Finally, the gaming industry has seen a number of mergers and acquisitions (M&A) which should further consolidate the sector. Consolidation should increase barriers to entry, perhaps giving larger companies a better competitive moat.
Investors looking for market niches that can emerge stronger from a potential recession may consider attractive margins and growth as the alpha and omega of their investment criteria.
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