Daily Outlook

Sony shares could rally 20% on PlayStation 5

Sony shares are sitting at their highest level since June 2001, despite a dip on Wednesday. Analysts say there could be further upside in the next year as Sony prepares to launch the flagship PlayStation 5 games console. The Japanese electronics giant posted better-than-expected earnings on Tuesday for the April to June quarter and provided an outlook ahead of consensus.

On average, analysts polled by Refinitiv expect Sony shares to hit 9,538.95 yen ($90.35) in the next 12 months, around 9.5% upside from Wednesday’s opening price, buoyed by the company’s strong gaming business and recovery in its image sensor division.

Sony’s 19-year high share price is a vote of confidence by investors in the multi-year turnaround plan that was initiated by previous CEO Kazuo Hirai. Hirai took the role in 2012, and was succeeded by Kenichiro Yoshida in 2018. Under the two CEOs, Sony has put a large emphasis on its gaming division. In fact, in Sony’s fiscal first quarter that just ended, the company’s game and network services unit accounted for about 54% of total operating profit.

Meanwhile, Sony’s subscription service called PlayStation Plus, saw subscriber numbers reach 44.9 million in the April to June quarter, higher than 36.2 million in the same period last year.

Sony is also gearing up to release the PlayStation 5, its newest console since the PlayStation 4 in 2013. The Japanese firm said the new console will be available in time for the 2020 holiday season, just as Microsoft plans to release its new Xbox Series X.

Concerns
Sony saw declines in revenue in other key businesses including movies, music and its image sensing unit. The latter has been a critical business for Sony in recent times given its expertise in smartphone camera sensors, which it sells to customers including Huawei and Apple. Profit fell over 48% year-on-year in the quarter ending in June to 25.4 billion yen. And Sony forecast that this business will see profit decline over 44% for the fiscal year.

Sony shares are at a 19-year high. Analysts are bullish on PlayStation 5, say stock could rally 20%, CNBC, Aug 5

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