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Investors seeking exposure to Japan’s growing gaming industry should look at technology and entertainment behemoth Sony , according to Goldman Sachs. The Wall Street bank believes the Japanese tech giant is well positioned to capitalize on emerging trends like gaming-as-a-service (GaaS) and the rising popularity of anime. GaaS refers to video games with a continuing revenue model that are regularly updated with new content. They encourage repeated player spending, as opposed to traditional single-purchase titles. Sony’s recent $3.6 billion acquisition of GaaS specialist Bungie is expected to provide the expertise to build Sony’s portfolio of live service games to 12 titles by fiscal year 2028, up from just one currently, according to Goldan’s analysts. Combined with recent price increases for PlayStation’s multiplayer game subscription service, the investment bank anticipates the GaaS push will “further boost the entertainment portfolio’s weighting in Sony’s overall business.” Sales from gaming account for 31% of the conglomerate’s total revenues, according to FactSet data. The Japanese firm also operates sizeable electronic and imaging products, music, and financial services divisions. Goldman expects shares of Sony Group Corporation to rise by 25% to 16,000 yen ($107) over the next 12 months. The Japanese company’s shares are also traded on the New York Stock Exchange. The median price target of 26 analysts polled by FactSet points to a 26% upside for Sony’s Tokyo-listed shares and 29% for its U.S.-listed shares. SONY YTD mountain Anime streaming The rising demand for streaming and cloud gaming services has led to several mergers and acquisitions in recent years. Most recently, Xbox-owner Microsoft closed its acquisition of video game publisher Activision Blizzard after a lengthy regulatory review . In addition, Goldman Sachs said there was significant growth potential for Crunchyroll, Sony’s anime streaming service based in California, which it acquired in 2017. “Our team estimates that overseas markets will account for 80% of Japanese anime sales by 2036,” the bank’s report said. It added that the anime division’s subscriber base is expected to grow on average by 14% year-on-year until 2018, in addition to a 20% hike in per-subscriber fees over the period. As earnings contributions from Crunchyroll and GaaS titles become more apparent starting in fiscal year 2025, Goldman Sachs sees an increase in consensus earnings estimates and valuation multiples.
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