SONY Increases 30% YTD: Will the Upward Trend Continue?
Sony Group Corporation SONY is witnessing healthy momentum this year with shares having gained 30.3% year to date compared with the sub-industry’s growth of 28.5% and S&P 500 Composite’s rise of 16.3%. Headquartered in Tokyo, SONY is one the leading manufacturers of consumer and industrial electronic equipment.
SONY has been noticing continued strength in Game & Network Services Segment (G&NS), its largest business segment. In the last reported quarter, revenues from this segment were up 61.3% year over year to ¥1073.2 billion. The company sold 6.3 million units of Play Station 5.
Sales of Play Station along with positive impact of forex movement, first-party titles and improving hardware and peripheral sales are major growth factors.
Going ahead, management expects revenues to be up 7% year over year in fiscal 2023. Moreover, SONY now expects to sell more than 25 million units of its PlayStation 5 in the current year.
Image Source: Zacks Investment Research
Strength in Music, Pictures, and Imaging & Sensing Solutions segments are tailwinds. Frequent product launches and strategic collaborations bode well.
The Music segment benefited from higher recorded music and music publishing sales from paid subscription streaming services. Segmental sales increased 18.6% year over year to ¥349.5 billion in fiscal fourth quarter.
The Pictures segment is gaining from higher series deliveries, Industrial Media and Bad Wolf acquisitions. In the last reported quarter, the segment’s sales jumped 15% year over year to ¥359 billion.
The company’s earnings are expected to increase 3.7% and 17% on a year-over-year basis in fiscal 2023 and 2024, respectively. The Zacks Consensus Estimate for fiscal 2023 and 2024 earnings per share is pegged at $5.65 and $6.61, respectively, unchanged in the past seven days.
SONY outpaced estimates in all the trailing four quarters, delivering an earnings surprise of 33.6%, on average. The long-term EPS growth rate is anticipated to be 4.7%.
However, the company expects sales of ¥11,500 billion for fiscal 2023, down 0.3% year over year. The top-line performance is likely to be affected by weakness in Entertainment, Technology & Services (ET&S) and Financial Services segments’ sales. Nonetheless, improvement in GN&S, Music and Pictures segments’ sales is expected to provide some support.
Revenues from the ET&S segment are expected to be down 4% owing to a decrease in sales of televisions and negative impact of forex volatility. Financial Services’ sales are expected to be down 40% year over year mainly due to deducting the amount equivalent to the surrender benefit from revenues. The revenues were earlier included in insurance premium revenues due to the adoption of IFRS 17.
SONY recently announced that it is mulling a partial spin-off based on the premise of listing of shares of Sony Financial Group Inc. that operates Financial Services business to boost growth
Apart from that, weakness in global macroeconomic conditions is compelling cutbacks in discretionary spending. This is likely to act as a headwind in the near term. Stiff competition in the gaming space from the likes of Microsoft along with increasing investments on product enhancements remain concerns for this Zacks Rank #3 (Hold) stock.
Stocks to Consider
Some better-ranked stocks in the broader technology space are Dropbox DBX, Badger Meter BMI and Blackbaud BLKB. All stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 10.1% in the past 60 days to $1.85 per share. The long-term earnings growth rate is anticipated to be 12.3%.
Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have gained 25.2% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have soared 99% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has increased 9.3% in the past 60 days to $3.75 per share.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of BLKB have improved 32% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Badger Meter, Inc. (BMI) : Free Stock Analysis Report
Blackbaud, Inc. (BLKB) : Free Stock Analysis Report
Dropbox, Inc. (DBX) : Free Stock Analysis Report
Sony Corporation (SONY) : Free Stock Analysis Report
