Sony Group¡¯s long-awaited rise to record highs has emboldened bullish investors and analysts, who see gains extending into 2025 on a robust outlook for video games.

Shares of the PlayStation maker surged over 50% from an August trough to reach an all-time high last week, more than doubling the gain in the Topix. It was the first new peak for the stock since 2000.

Growth in the company¡¯s gaming business, which now generates over a third of total revenue, is seen boosting shares further next year. Anticipation is high for the upcoming launches of in-house games like Ghost of Yotei and Rockstar Games¡¯ Grand Theft Auto VI.

As optimism grows, bearish bets on Sony have receded, with short interest down to 0.5% of the free float from over 2% about a year ago.

¡°I would expect 2025 to be one of the greatest years ever for video games, and I assume Sony will get a large piece of that,¡± said Pelham Smithers, an analyst specializing in gaming stocks whose London-based firm offers research on Japanese equities.

The PlayStation¡¯s compatibility with games made by other companies gives Sony an edge over rival Nintendo, whose consoles are limited to in-house titles, Smithers added. Other expected blockbusters for 2025 include Capcom¡¯s Monster Hunter Wilds.

Sony¡¯s gaming and network services segment accounts for around 37% of its revenue, with sales reaching ?1 trillion ($6.4 billion) in the three months through September. The company beat earnings expectations in the latest quarter and raised its outlook as strength in games and music offset uncertainties over its semiconductor business.

In anticipation of the holiday season, Sony launched a $700 ¡°Pro¡± version of its PlayStation 5 in mid-November. Still, its recent success is largely down to moves to reduce dependence on consoles and focus on software and intellectual property, according to Junichi Inoue, portfolio manager and head of Japanese equities at Janus Henderson Investors.

Games, music and movies are ¡°inherently cash-generative¡± businesses that help the company weather volatility in the chip sector, said Inoue, whose Japan Opportunities Fund holds Sony shares. Top-quality management also makes Sony ¡°an ideal company for a buy-and-hold investment,¡± he added.

¡°Strategic¡± acquisitions have expanded the company¡¯s entertainment and IP businesses in recent years, Inoue said. Sony announced Thursday it will take a 10% stake in publishing firm Kadokawa next month, a move that will tighten its grip on the creator of hit role-playing game Elden Ring, which is set to release a sequel next year.

Despite the recent run up in its stock, Sony still trades at a lower earnings multiple than Nintendo and its other main console competitor, Microsoft. It¡¯s also cheaper than fellow large-cap Japanese tech names, like...