Japan’s Sony Corp (SNE) has invested $250 million to acquire a minority stake in Epic Games, the creator of video game “Fortnite”.
The investment allows Sony and Epic to broaden their collaboration across Sony’s leading portfolio of entertainment assets and technology, and Epic’s social entertainment platform and digital ecosystem. The deal is still subject to regulatory approvals, the two companies said in a statement.
“Epic’s powerful technology in areas such as graphics places them at the forefront of game engine development with Unreal Engine and other innovations. There’s no better example of this than the revolutionary entertainment experience, Fortnite,” said Sony CEO Kenichiro Yoshida. “Through our investment, we will explore opportunities for further collaboration with Epic to delight and bring value to consumers and the industry at large, not only in games, but also across the rapidly evolving digital entertainment landscape.”
Fortnite is the world’s largest game with over 350 million accounts and 2.5 billion friend connections, while Unreal Engine powers the world’s leading games.
The investment into the major player of video games comes as Sony is getting ready to launch its next-generation PlayStation 5 (PS5) console later this year which will compete with other rival products, including Microsoft Corp.’s (MSFT) Xbox. The tech giant just announced a new July 23 games event to reveal its video game lineup for the upcoming Xbox Series X console.
Sony shares rose 2.5% to $71.53 at the close in U.S. trading on Thursday taking this year’s advance to 5.2%.
Five-star analyst Andrew Uerkwitz at Oppenheimer recently reiterated a Buy rating on the stock with a $70 price target, saying that the striking PS5 console and a strong slate of exclusives gives him confidence that Sony is well positioned for strong gaming growth over the next several years.
“Starting strong in games is more critical than ever in next gen competition. Xbox not only builds momentum with its proactive series of events and management interviews, but also plays serious catch-up on the breadth and depth of its exclusives,” Uerkwitz wrote in a note to investors. “Sony needs to assure players that it is still the superior console platform with unique games.”
The rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus shows 3 Buy ratings versus 2 Hold ratings. The 12-month average price target of $75.12 would provide investors with a 5% gain. (See Sony stock analysis on TipRanks)