Sony Corp Stands Out Among Technology Stocks

Shares of Sony Corp are up 16% this month, far exceeding the 5% increase in Japan’s Topix Stock Index ($TOPX).  Despite signs of a slowdown in technology and media industries, Sony is rallying on optimism that its earnings will show more robust videogame sales and healthy demand for its smartphone chips.  Sony is benefiting from strong PlayStation sales as supply shortages of the game counsel have eased. 

Analysts are upbeat on Sony’s earnings prospects and have raised their earnings per share (EPS) estimates for this year by 3.7% from a bottom in early November.  In addition, Libra Investments said, “the game segment has been the most important source of Sony’s cash flows, and PlayStation shipments haven’t been as bad as feared, so there has been fresh buying of the company’s shares.”

The bullish outlook for Sony is a sharp contrast from the gloom hanging over other major technology stocks.  Intel (INTC) tumbled more than -8% today after its sales forecasts for the latest quarter fell far short of expectations amid a slump in personal computer demand.  Also, Microsoft (MSFT) earlier this week posted a decline in revenue from its Xbox sales amid a post-pandemic slump.

In addition to the improved environment for its video games, demand remains resilient for Sony’s image-sensor microchips for use in premium smartphones.  The higher-end models feature more cameras that require more sensors per unit sold.  Nissay Asset Management said, “every mobile-phone maker wants to improve the performance of the camera on their phones, so the unit price is rising, offsetting any macroeconomic headwinds.”

The recent rebound in the yen is a negative for many Japanese exporters.  Still, the impact on Sony is limited due to its diversified range of businesses, including financial operations and film and music production. Bloomberg Intelligence sees Sony’s earnings potentially beating consensus on strength in the chip business. Also, SMBC Nikko Securities said, “conditions are tougher now, but we think the market will look positively on Sony as it operates nimbly in a range of businesses.” 

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