Sony Group Corp (SONY) stock forecast: Hitting the rebound
Japanese electronics and media giant Sony Group Corporation (SONY) is a company known to millions.
Sony has pioneered some of the most definitive media and electronics products of the past few decades, ranging from the Walkman portable CD player in the 1980s to high-end TVs, cameras and mobile phones and the gaming icon that is the Playstation console.
Away from its familiar presence in consumer products, Sony is also a major player in the music and entertainment business through its record label and movie franchises, as well as ranking among the world’s top producers of electronics components and industrial manufacturing.
In recent months, the company’s New York Stock Exchange-listed shares have struggled, shedding 15% of their value so far this year amid rising competition in one of its key niches, the gaming market.
Microsoft’s blockbuster $69bn acquisition of Activision Blizzard, the creator of popular titles such as Call of Duty, Warcraft and Candy Crush, announced on January 18, has upended the gaming world and put more pressure on Sony.
While Playstation 5 has proved a hit with consumers, sales have stuttered and forecasts for this year have been lowered from 14.8 million units to 11.5 million. The company has grappled with ongoing supply-chain crunches and semiconductor shortages, which have stifled growth over the past year.
Sony acknowledged in its results for the third quarter of 2021, released earlier this month, that pandemic-induced supply-chain issues were continuing to weigh on its financial performance.
“The Covid-19 pandemic is adversely affecting procurement of components and raw materials, production, development, sale and distribution of the products and services in each of Sony’s business segments, and these negative impacts are expected to continue in the future,” the company said.
New gaming titles set to be released this year, as well as a proposed push into the electric vehicle market, could help alleviate pressure on the stock. But, what is the Sony share price forecast for the rest of the year, and can the Sony Group share price recover from its recent struggles?
Sony Group stock analysis
Sony stock has suffered a volatile ride in 2022, with the NYSE share price falling over 15%, as of 15 February, to $107.50, down from a 52-week high of $133.75.
Lingering concerns on the supply side have dealt a blow to investor confidence. Its electronics business has struggled to meet solid demand. Worries over competition in the lucrative gaming market were compounded by Microsoft’s acquisition of Activision Blizzard. The news sent the stock down by around 12%.
And the Xbox, Sony’s gaming rival, gained sole control over some of the industry’s most popular titles, prompting uncertainty over Sony’s position in the market.
In the course of the past two years, Sony stock has risen significantly. The boost to the gaming market from pandemic-induced lockdowns helped the shares increase from the pandemic low of around $53 to the current (16 February) share price of just over $108.
Latest financial results
Third-quarter earnings reveal that sales revenue from Sony’s Game and Network Services (G&NS) fell by 7.9% year-on-year to JPY813.3bn ($725m). The segment’s sales accounts for 26% of all revenues – the largest by revenue across the group’s business.
According to Sony, lower G&NS sales were due to manufacturing and supply-chain constraints caused by the global semiconductor shortages and logistical delays.
“Due to limitations on the supply of components, especially semiconductors, and an increase in delivery times resulting from disruption of the global distribution supply chain, we have revised our FY21 unit sales forecast for PS5 hardware to 11.5 million units,” the company said in the report.
“Limitations on the supply of components are expected to continue, but we are continuing to exert every effort to meet the strong demand for PS5.”
In contrast, operating income from G&NS increased to JPY92.9bn ($803.1m), up 12% from the same period last year.
Sony attributed the higher operating income “primarily due to a decrease in selling, general and administrative expenses, and an improvement in PS5 hardware profitability, partially offset by a decrease in software sales.”
In response to continuing supply-chain disruption, Sony has cut its sales forecast for the G&NS segment’s in fiscal year 2021 to JPY2.73trn, down 6% compared on the previous forecast. However, the group raised its operating income projection by JPY20bn to JPY345bn.
Sony’s second largest business segment by sales revenue is its Electronics Products & Solutions (EP&S), which generated JPY686.9bn sales in Q3, down 1.7% from a year ago. The segment’s operating income also fell by 22.6% to JPY80bn.
In contrast, sales from Sony’s Pictures segment soared to JPY461.2bn, more than doubling Q3 2020 levels. Operating income also increased by more than seven-fold to JPY149.4bn.
According to Sony, Venom: Let There Be Carnage and Spider-Man: No Way Home generated most of the box office revenues in Q3. The global box office take from Spider-Man accounted for 64% of the total motion picture revenues, while Venom generated a quarter of sales.
Downside risks
After the latest Sony stock news, investors will be keenly aware of potential downside risks for the company. This is despite its long history of industry-leading products and strong positions across most market segments.
The reaction to Microsoft’s Activision Blizzard acquisition demonstrates the competitive nature of the key gaming segment. The gaming space is becoming an increasingly diverse industry and one in which multiple other players such as Electronic Arts also hold leading positions.
There remain significant risks acknowledged by Sony from the ongoing impact from the pandemic on supply chains and its ability to meet customer demand. Meanwhile the company can also be affected by domestic developments in Japan and other macroeconomic factors.
Sony Group (SONY) stock forecast
The Sony stock prediction had a median 12-month target of $150.00 at the time of writing (16 February) according to 21 analysts listed by CNN Money. Sony stock price targets varied, with a high estimate of $177.38 and a low estimate of $106.71.
The median Sony stock price forecast represented a potential upside of around 38% on the current (16 February) share price of around $108.45.
The stock held a consensus ‘buy’ rating, with 17 out 24 analysts giving it a ‘buy’ rating, two an ‘outperform’, five ‘hold’ and no ‘sell’ or ‘underperform’.
Note that analysts’ projections of the Sony stock future price can be wrong. You should always conduct your own research before making any investment or trading decision. And never trade or invest money you cannot afford to lose.
Looking ahead
While Sony shares have not enjoyed the best start to 2022, the company’s fundamentals are strong and it remains one of the most well-known and trusted brand names across many of the sectors in which it operates.
With a strong market position and plans to invest heavily in some of its key segments amid rising competition, Sony shares could benefit from price increases, despite ongoing challenges with inflated costs and supply chain issues.
Whether you should buy, sell or hold Sony stock is your choice. Always remember that your decision to trade should depend on your attitude to risk, your expertise in the stock market, the spread of your portfolio and how comfortable you feel about losing money.
FAQs
Is Sony a good stock?
Sony shares had a ‘buy’ rating from 17 out of 24 analysts polled by CNN Money at the time of writing (16 February).
Note that analysts’ predictions can be wrong. You should always conduct your own research before making any investment or trading decision. And never trade or invest money you cannot afford to lose.
Why has the Sony stock price been going down?
Stock in Sony fell 12% on the day Microsoft announced its acquisition of games creator Activision Blizzard for $69bn, amid concerns about heightened competition in the market.
How high can Sony stock go?
Gov Capital forecasts Sony stock to reach $643.97 by 2026, above the all-time high of $137.98 on 2 January 2000. However, analysts’ forecasts can be wrong and have been inaccurate in the past.
When will Sony stock go up or down?
The Sony stock price prediction had a median 12-month price target of $150.00 at the time of writing (16 February), with a high estimate of $177.38 and a low estimate of $106.71, according to 21 analysts listed by CNN Money.
Note that analyst predictions can be wrong. Your decision to invest should be based on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose. And bear in mind that past performance is no guarantee of future returns.
Markets in this article
