Sony stock likely to trade sideways despite strong expectations - UBS
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Sony (SONY
-2.5%) stock is facing some strong expectations amid newly hotter competition, but it's likely to trade sideways for now, UBS says in a level-set following the blockbuster news of the Microsoft-Activision Blizzard deal.

That $68.7 billion acquisition is set to change the power dynamic in videogames, as it would make Microsoft the world's third-biggest videogame company by revenue, behind Tencent (TCEHY
+0.1%) and Sony.
The threat to Sony comes largely in investment capacity, UBS notes: It estimates annual free cash flow generation capability at Microsoft can be about 10 times Sony's Â¥700 billion (about $6.1 billion). But Microsoft taking control of Activision Blizzard (and ZeniMax/Bethesda Softworks, which Microsoft acquired in 2020) doesn't "translate directly" into erosion of Sony's PlayStation popularity - "at least, as long as the popular software from Activision and ZeniMax continues to be sold for the PlayStation."
UBS is Neutral on Sony, expecting little price movement, noting the emergence of metaverse investing means that game companies could be in for ongoing large acquisitions (by majors such as Microsoft, Amazon.com (AMZN
-0.3%), Google (GOOG
+1.1%, GOOGL
+1%) and Tencent (TCEHY
+0.1%)). Also, with the PlayStation 5 in short supply, many big game launches for that platform are being put off, as well as the company facing mounting development costs in the EV business.
Games and EVs are set to come under the spotlight at Sony, and while the market seems to be confident in the management team, "we expect more investors to adopt the view that it is not clear yet whether the company can emerge as a successful player in both markets."
UBS has a Neutral rating and maintains a price target of Â¥13,000; that now implies 5% upside after shares fell 12.8% in Tokyo Wednesday.
In Jefferies' most recent take, the firm says Amazon and Sony are the companies most likely to make the next key deals for videogame publishers.