The gaming craze sweeps the globe, and 2025 may be the "greatest gaming year"! Sony's stock price embarks on a "long bull curve."

According to Zhitong Finance APP, the stock price of Sony Group (SONY.US), a leader in Japan's technology and entertainment industry, has finally been pushed to a historical high in 2024 by bullish forces. This has greatly boosted the confidence of investors and analysts who are optimistic about this Japanese giant, as they believe that the gaming boom is sweeping the globe and the prospects for the video game sector are extremely optimistic. They expect the upward trend in Sony's stock price in the Japanese stock market to continue into 2025, anticipating a "long-term bull market" for Sony's shares. Although Sony's trading price in the Japanese stock market has reached a historical high, the ADR price in the U.S. stock market has not yet surpassed the historical peak set during the internet bubble in 2000.

The stock price of this PlayStation consumer electronics manufacturer soared from a phase low in August to a historical high set last week, with a cumulative increase of over 50% during this period, bringing its market capitalization to as high as $130 billion. The stock price increase is more than double that of the benchmark index in the Japanese stock market, the Tokyo Stock Exchange Index. This marks the first new high for the stock in the Japanese stock market since the global internet bubble in 2000.

The continuous growth of the company's gaming business is the core logic behind the capital's favor for this stock. Currently, the gaming business accounts for more than one-third of Sony Group's total revenue, and it is expected that the prosperous development of the gaming industry next year will further boost Sony's stock price.

Gamers have extremely high expectations for the highly anticipated internal game "Soul of Mount Yingtai," as well as Rockstar Games' blockbuster "Grand Theft Auto 6" (GTA 6), which is likely to attract a global influx of video game enthusiasts. Industry insiders predict that "GTA 6" may break almost all records in the video game industry—whether in terms of player scale or sales statistics. Other popular games expected to be launched in 2025 include Capcom's "Monster Hunter: Wilderness."

Since its debut in the late 1990s, the GTA series has generated revenue of up to tens of billions of dollars. It is understood that the developer of the GTA series, Take-Two Interactive Software (TTWO.US), unexpectedly narrowed the release window for "GTA 6" to the fall of 2025 in May, laying the groundwork for the launch of the latest installment of one of the world's most popular video game series next year. Wall Street investment firm Wedbush Securities expects that the order growth for Take-Two in the next two fiscal years will largely come from "GTA 6," which will be released next year.

As investor optimism has significantly increased due to this gaming boom, bearish bets on Sony have greatly decreased, with short interest dropping from over 2% about a year ago to just 0.5% of the freely traded shares "We expect 2025 to be the greatest year in the history of video games, and I believe Sony will take a big share of it," said Pelham Smithers, an analyst specializing in the gaming industry at a London investment research firm that provides reports on the Japanese stock market.

Smithers added that the compatibility of PlayStation devices with games produced by other companies gives Sony a significant advantage over its competitor Nintendo, as Nintendo's consoles are limited to its own games.

The latest financial report shows that Sony's gaming and network services division accounts for about 37% of its total revenue, with revenue in that division reaching 1 trillion yen (approximately USD 6.4 billion) for the three months ending in September. The strong performance of the gaming and music businesses offset the uncertainties in Sony's semiconductor business, leading to a substantial earnings beat last quarter and an upward revision of its outlook.

Sony's financial report indicates that its gaming and network services division is the core driver of the company's strong performance, with key factors including increased sales of third-party game software, improved foreign exchange rates, and significant growth in sales including the PlayStation Plus online service.

Sony currently predicts that its gaming and network services division will achieve revenue of 4.49 trillion yen (approximately USD 29.3 billion) for the fiscal year ending March 3, 2025. This is more optimistic than the August forecast of 4.32 trillion yen (approximately USD 28.2 billion). The company also expects an overall operating profit increase of 35 billion yen for this division in the current fiscal year.

To prepare for the Christmas and New Year holiday season, Sony launched the $700 PlayStation 5 "Pro" version in mid-November. However, Junichi Inoue, portfolio manager at Janus Henderson Investors and head of Japanese equities, stated that Sony's recent success in the stock market and performance is mainly due to its reduced over-reliance on gaming consoles and focus on game software and intellectual property initiatives.

Inoue noted that gaming, music, and film are "essentially cash-generating growth businesses," which greatly help the company cope with the inevitable cyclical nature and volatility of the chip industry. The "Japan Market Opportunities Fund" managed by Inoue holds a substantial stake in Sony. He added that the high-quality management model also makes Sony an "ideal investment target for buy-and-hold long-term."

Inoue stated that recent "strategic" acquisitions have expanded the company's entertainment and intellectual property business. Sony announced on Thursday that it will acquire a 10% stake in the well-known publishing company Kadokawa Group next month, which will strengthen its control over the globally popular role-playing game developer of "Elden Ring," which is set to release a major sequel next year.

Despite a recent rise in Sony's stock price, its price-to-earnings ratio remains lower than that of Nintendo and its main gaming console competitor Microsoft (MSFT.US). Damian Thong, head of Japanese equity research at Macquarie Capital, stated that Sony's stock price is also lower than that of large Japanese tech companies like Hitachi, indicating that there is significant room for further stock price increases for Sony in 2025

"The gaming business is becoming a key focus for Sony again, and gaming profits appear to be sustainably growing," said Tony Tsang, head of Japanese equity research at Macquarie Capital. Earlier this month, he raised Sony's target stock price significantly by 17% to 3,950 yen. The stock is currently trading at around 3,300 yen. "The valuation is cheap, and they will achieve strong profit growth through their gaming business—this is a very nice strong combination."

Wall Street analysts have struggled to keep up with the rapid rise of the stock, with the average target price only increasing by about 9% from the low in September. Wall Street remains optimistic about Sony, with 24 "buy" ratings, 5 "hold" ratings, and only 1 "sell" rating.

Sony will face some challenges next year, including the possibility of the yen strengthening significantly due to the Bank of Japan's interest rate hike path, and the trade war initiated by Donald Trump, who is returning to the White House, which may pose risks to the sustained expansion demand for Sony's gaming business in the Asian market. However, gaming industry analysts believe that gaming software and some online gaming services, such as PlayStation Plus, are considered less susceptible to the impact of increased tariffs compared to hardware like Sony's gaming consoles.

"Sony's stock price stands out among global gaming stocks at this time, with one of the core supports being that it has not been overly negatively affected by analysts' geopolitical concerns like semiconductor and other hardware companies," said Tony Tsang of Macquarie Capital. "Gaming is not really a national security issue."