Sony stock plunges as investors expect increased competition from Microsoft

Sony (SONY.US) stock fell another 4.0% on Wednesday, extending yesterday's 7.0% sell-off which followed news of Microsoft’s (MSFT.US) deal to buy video game maker Activision Blizzard (ATVI.US) for $68.7 billion. Sony investors fear that intensifying competition could hamper the Japanese conglomerate's future earnings in the gaming business. According to Bloomberg, the recent stock plunge wiped around $20bn from Sony's market value. 

Sony and Microsoft are key players in the gaming industry and both companies released their new consoles in Nov. 2020. Until September Sony had sold over 13 million PlayStation 5 consoles. Exact sales of Microsoft's Xbox Series X are not known as the company does not provide console sales details, but analysts and independent data points out that PS5 was more popular than the Microsoft product.

However, the recent acquisition of Activision should expand Microsoft's offerings of strong titles, which may attract more gamers to its console and overall gaming ecosystem. On the other hand, Sony also made several acquisitions of smaller firms last year, including the U.S.'s Bluepoint Games, Finland's Housemarque and U.K.-based Firesprite. Nevertheless, the Activision deal was positive news for other major publishers like Ubisoft (UBI.FR), whose price rose by 11%. Perhaps shareholders see the companies as the next potential targets for a takeover. 

Sony (SONY.US) ADR fell over 7% on Tuesday and a downbeat mood can be spotted also today. Nevertheless, buyers managed to halt declines around $110.00 level which is strengthened by long term upward trendline, 200 SMA (red line) and 61.8% Fibonacci retracement of the upward wave launched in mid-May 2021. As long as the price sits above this level, further upward impulse is possible. On the other hand, if sellers will manage to break lower, then downward move may accelerate towards psychological support at $100.00. Source: xStation5