Immersion: The Thing Behind The Thing For Playstation 5

Each week, Benzinga examines a stock that might be considered a little under the radar. You may have never heard of the company before, but chances are you're pretty familiar with the line of work it's in. We call these the "things behind the thing."

A small-cap company could be the way to play the early success of the Playstation 5.

Strong Demand for Playstation 5: Retailers like Walmart Inc WMT and Best Buy Co BBY are struggling to keep up with demand for the Playstation 5 console from Sony Corporation SNE.

In Japan, the console sold out in its first day as retailers held draws to see who got supply due to a limited number of available consoles.

On Amazon.com's AMZN video games best seller list, Playstation 5-related items hold high ranks, with a gift card for Playstation in the No. 1 spot as of Nov. 15.

In July, I wrote about demand for the Playstation 5 rising from 6 million consoles sold in 2020 up to 10 million units.

The Playstation 4 took eight months to ship 10 million units.

Related Link: Console Wars Heat Up With Playstation 5 Price And Games Reveal

The Thing Behind the Thing: Small-cap company Immersion Corporation IMMR is powering the DualSense controllers for the Playstation 5.

Immersion is a haptics technology company that creates the vibration and sense technology that makes people feel their controllers react to gameplay.

Sony and Immersion have a licensing deal that sees Immersion earn a royalty on every controller sold.

The console comes with one controller, but Immersion believes people will also want more advanced controllers.

The Verge reports on how the DualSense controller makes games better with its haptic vibrations. The article highlights a game called “Astro’s Playroom” that comes with the console.

In “Astro’s Playroom,” gamers can experience the crunch of sand, cracking of glass and elastic tension from pulling a rope.

Financials: Immersion reported third-quarter revenue of $7.6 million, which beat the consensus of $7.45 million. Earnings per share of 15 cents beat estimates of 9 cents per share.

The company reached profitability on a GAAP basis in the third quarter.

Immersion ended the third quarter with $56 million in cash.

What’s Next: All eyes should be on the overall sales figures for the Playstation 5 to see how many initial consoles were sold.

Immersion’s next quarterly earnings could show the strength of the Sony license.

Deals with LG for mobile and Jeep for the upcoming Jeep Wagoneer are also items to watch.

Strong adoption from the DualSense controller could lead to more deals for Immersion’s technology in the gaming market.

Immersion could also be a buyout target for a gaming or hardware company to gain access to the haptic technology and patents owned by the company.

Price Action: Shares of Immersion were down 4% Friday to $7.67. Shares are up 8% year-to-date.