There's been no shortage of companies executing a forward stock split in 2024. Among these are electronics giant Sony Group (SONY +1.20%) and software company MicroStrategy (MSTR 1.65%). Sony's 5-for-1 stock split is scheduled to occur Oct. 1, while MicroStrategy completed its 10-for-1 split in August.
Both companies fall under the camp of tech stocks, but Sony and MicroStrategy have diverged from their roots in electronics and data analytics, respectively. Today, Sony is focused on its entertainment business, while MicroStrategy describes itself as the "largest corporate holder of Bitcoin in the world."
These factors contribute to the reason each company is an intriguing stock-split investment. Those factors also complicate evaluating which to invest in, and some investigative work is required to uncover each company's pros and cons. Here's a breakdown of these veteran tech companies to help you decide which is a better investment.
NYSE: SONY
Key Data Points
Unpacking Sony
Although Sony began in 1946 as an electronics company, its video games, film, and music divisions are now the dominant source of sales. These segments made up about 60% of its revenue in its 2023 fiscal year, ended March 31, 2024.
The conglomerate possesses an array of strong entertainment businesses. In addition to Sony's PlayStation video game console, with sales that outstripped those of rival Microsoft's Xbox, the company's 2018 acquisition of EMI made it the world's largest music publisher. In June, the company acquired Alamo Drafthouse Cinema, becoming the first major studio to own a movie-theater chain in 75 years.
Sony's strategy is to merge its tech know-how with its entertainment businesses to create competitive differentiation. For instance, its gaming software was used to build its Torchlight tool, which enables filmmakers to better plan movie shoots by using virtual environments.
Its impending stock split will lower the price of each individual share, so that may seem like the moment to buy -- but there's a catch to investing in Sony. The company plans a partial spin-off of its financial services division in 2025.
As part of this, shareholders will receive stock in the new company in exchange for Sony shares. (This article provides a deeper analysis of the spin-off to help you weigh whether you want to own stock in the new company.)
As far as Sony's entertainment focus goes, the strategy is working. In its fiscal first quarter ended June 30, the conglomerate's revenue rose 12% year over year to 2.6 trillion yen when excluding its financial services segment, as opposed to just 2% growth with all divisions included.
Assessing MicroStrategy
MicroStrategy started in 1989 as a software company helping customers gain business insights from their data. In 2020, the company began investing the cash generated from its operations into Bitcoin.
Since then, MicroStrategy has amassed 226,500 Bitcoins as of July 31. It holds such a substantial amount of the cryptocurrency, its stock now closely mirrors the price of Bitcoin.
Data by YCharts.
At this point, investing in MicroStrategy has as much to do with the value of its digital currency as its software operations. In fact, the company's management makes the case it's a better investment choice than a spot Bitcoin exchange-traded fund (ETF) for investors who want exposure to the cryptocurrency, since it can use the cash from its software business to fund Bitcoin purchases.
The management team has a good argument. From the start of its 2020 investment in Bitcoin through the end of this July, MicroStrategy stock has risen more than 1,200%.
However, MicroStrategy isn't only using its cash from operations to fund Bitcoin purchases. It's also taking on debt as another source of funding. Its Q2 total liabilities of $4.2 billion included $3.8 billion in debt, which is an increase over the prior year's debt of $2.2 billion.
Whether MicroStrategy can sustain this Bitcoin buying strategy over the long run is debatable because its revenue growth has stalled. In Q2, the company's software business suffered a year-over-year drop in sales to $111.4 million from $120.4 million in 2023. That's the third consecutive quarter of a year-over-year revenue decline.
Choosing between Sony and MicroStrategy
Unless you're looking for a way to invest in Bitcoin, Sony is the better long-term investment choice between these two tech companies. It's carving out a niche in the entertainment industry by leveraging its electronics expertise to deliver consumer experiences.
Meanwhile, MicroStrategy's Bitcoin focus has boosted its stock, but the company's mounting debt and declining revenue mean investing in its shares for the long haul is risky.
The one caveat with a Sony investment is assessing whether you want to own shares in its financial services spin-off. Some details of the spin-off aren't yet known, such as how many Sony shares will be exchanged for stock in the new company.
Since a stock split doesn't change the overall market value of your investment, there's no rush to buy Sony. It's prudent to wait until more spin-off details are disclosed before deciding whether or not to buy shares.
