Sony PlayStation 4 Preview: 5 Tech Stocks to Watch

Sony PlayStation 4 Preview: 5 Tech Stocks to Watch

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The growth in tablet and smartphones will continue to change the dynamics of home entertainment. Mobile gaming will compete for the budget of console gaming. With updates on the way, Microsoft’s (MSFT) Xbox and Sony’s (SNE) PS3 upgrades could strengthen interest back to the living room. [Related: Weak Game Sales Are No Problem for this Stock]

Sony’s PlayStation 4 will have the following specifications, according to a report from game site Kotaku:

·      Four dual-core Advanced Micro Devices (AMD) Bulldozer processors
·      AMD Graphics processor
·      8GB RAM
·      160GB Hard Drive

There are a number of tech stocks to watch in light of the upcoming PS4 build.

AMD, whose shares recently bounced from a low of $1.81, is now up over 55% from that level. The chip maker has a market capitalization of just $2B. Intel is $104 billion in size, while graphics chip maker NVIDIA is around 4 times bigger than AMD at $7.75 billion.

Sony appears to have learnt from its experience with the PS3 that expensive, technologically-leading parts do not equate to stronger sales. By using less expensive but high-performance parts, Sony could keep the hardware costs down.

Microsoft, whose new console is expected to be announced at E3 in June 2013, is also expected to be using AMD as a supplier for its console.

Analysis

From the initial launch, console makers are releasing cheaper units to compete more effectively with inexpensive tablets and free games on smartphones. This bodes well for the industry, because profits and sales will be tied to games, not hardware.

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Companies mentioned are listed below. Companies in the order of benefiting most from the hardware refresh are:

1. Advanced Micro Devices, Inc. (AMD, Earnings, Analysts, Financials): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap at $1.95B, most recent closing price at $2.74.

AMD is a risky investment, but its focus on the low-cost will prove to be beneficial for the company.
 

2. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $234.62B, most recent closing price at $28.01.

MSFT could finally produce profits from the entertainment division, if sales are strong from the launch of the new Xbox.
 

3. Sony Corporation (SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $15.32B, most recent closing price at $15.14.

SNE is innovating in its designs for smartphones, but a PS4 will help improve revenue.
 

Companies to watch are:

4. Nintendo Co., Ltd. (NTDOY, Earnings, Analysts, Financials): Mainly engaged in the development, manufacture and sale of entertainment products in home entertainment field.

Already released Wii U, the successor to the Wii during the holiday.
 

5. NVIDIA Corporation (NVDA, Earnings, Analysts, Financials): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap at $7.71B, most recent closing price at $12.34.

NVDA lacks a chip that would be used in the console refresh. NVDIA benefits from higher sales of Android tablets and phones. 

 

Compare analyst ratings to annual returns for stocks mentioned:

 

(List compiled by Chris Lau

 

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