How Product Launches Can Affect Technology Stocks

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A Brief History

On December 3, 1994, Sony Interactive Entertainment launched the original PlayStation in Japan.  Today, Sony Corporation of America (SCA), based in New York City and a subsidiary of the Japanese conglomerate Sony Corporation, is the U.S. headquarters of Sony, under which all Sony companies operate in the United States was listed on New York Stock Exchange.  Every investor wants to know what upcoming pieces of news could mean for them. In terms of the stock market, this can be based on a huge variety of emerging information. For example, the Dow Jones index enjoyed a 669.40-point boost in March 2018 due to the feeling that the risk of trade wars and global trade restrictions was lessening.

When we look at a particular company’s stock, it is often their latest product launches that drive price changes. In the area of technology, we have seen some fascinating swings in recent years due to the reaction to the latest models being brought onto the market.

Digging Deeper

Sony’s Diminishing Returns on PlayStation Upgrades

Source: IG

There is no doubt that the original PlayStation is a gaming icon that was massively successful with the public. Released in Japan in 1994 and then in North America and Europe the following year, it helped to kill off cartridge-based consoles while its better games line-up saw it come out ahead of the Nintendo 64 and Sega Saturn. With that in mind, how did Sony’s standing in the stock market fare when subsequent models were released?

Their stock price varied relatively little when each of the PlayStation 2, 3, and 4 consoles were announced, but the movement was steadily lower each time according to this graph on historic stocks. The PS2, in particular, went on to have healthy sales figures, but the market appears to have grown more concerned over time about how many they would sell, with the PS4 launch actually seeing the company’s stock lose value.

Anyone who anticipates drops like this in time can attempt to make money by, for example, learning how to trade CFDs (contracts for difference) smartly. Contracts for difference let you speculate on whether a certain financial market will fall or rise in a certain period. So, understanding that Sony – or any other stock – could be in for a rough patch lets you plan how to benefit from this situation.

Nintendo Gains with the Switch

A Nintendo Switch in portable mode with Joy-Con attached.  Photograph  by Evan-Amos.

Nintendo’s stock price has failed to benefit from a number of product launches lately. The appearance of the Wii made almost no impression on the market, although it would go on to put Nintendo back at the top of the console business for the first time in almost two decades. The GameCube made an even worse impact on investors, as the gaming company’s stock fell upon its announcement.

Yet, the launch of the Switch saw their stock’s value rocket by over 30%. The price climb began when rumors suggested that a low-price gaming device with impressive features was on the way. Stronger than expected sales of 14 million units in the first year showed that the market called this one right, even if the Switch could have stood to be more affordable on release.

Apple’s New iPhones Fail to Impress Investors

Source: IG

The iPhone range has been massively successful for Apple, helping them to become the most valuable public company in the world, with a market capitalization of $821.59 billion at the start of 2019. Apple stopped reporting iPhone sales figures in 2018, by which time the cumulative total sold had passed a staggering 2 billion phones.

So why did their stock value drop when the iPhone 7, 8, and X were each announced? Their earlier stock history charts mainly show a positive price impact following the launch of a new model, so these drops seem to suggest that investors are not seeing enough added value in the new phones. In some cases, disappointing sales figures prove that investors were right to be underwhelmed.

What Can We Tell from This Information?

Phillippine stock market board. Photograph by Katrina.Tuliao.

The stock market often gives us a good idea of how well a new product will sell, as serious investors analyze all of the relevant details carefully. Yet, sometimes a new product will grab the public’s attention more than expected or else flop without any warning.

Question for students (and subscribers): What is your favorite video game console?  Please let us know in the comments section below this article.

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Historical Evidence

For more information, please see…

Mitchell, William N.  The Sony Playstation: History, Technology and Legacy.  CreateSpace Independent Publishing Platform, 2015.

The featured image in this article, a photograph by Evan-Amos of a Sony PlayStation (SCPH-5001), shown with a DualShock controller and Memory Card, has been released by the copyright holder of this work into the public domain worldwide.


About Author

Abdul Alhazred

“But I don’t want to go among mad people," Alice remarked. "Oh, you can’t help that," said the Cat: "we’re all mad here. I’m mad. You’re mad." "How do you know I’m mad?" said Alice. "You must be," said the Cat, "or you wouldn’t have come here.” ― Lewis Carroll, Alice in Wonderland