Sony Stock Buy or Sell? Upcoming Projects are Key Factors For Success

The article was written by Moises Meir, a Financial Analyst at I Know First

Sony Stock Buy or Sell


  • Sony’s Crown Jewels: PlayStation 4 and Virtual Reality
  • Business Gaining Traction: Movies, Music and others
  • Financial and Stock Performance
  • Bullish Algorithmic Forecast for SNE


Japanese giant, Sony Corporation (SNE), is one of the most diversified and innovative companies in the world. They are top players in multi-billion dollar industries like entertainment, gaming, electronics and financial services. For the second half of 2017, Sony plans to release a wide array of new products and projects that are very likely to improve its stock price.

It’s worth noting that Sony was much more diversified before, but CEO Kazuo Hirai took the decisive decision of closing or reconstructing all of the divisions that were operating at a loss. This move ensures that Sony still operates in varied industries but has a narrower focus.

Sony’s Crown Jewels: PlayStation 4 and Virtual Reality

It is no secret that Sony’s most profitable segment is the PlayStation 4. It accounts for 18% of its sales and has been leading in the video game console market since the days of the PS2. It had 12.3 million units sold in 2016 compared to 5.8 million sales by its main competitor, Microsoft’s Xbox One. They have absolutely hammered the competition by being better in many aspects while having similar costs. Examples of the advantages PS4 has over others are: major games that are exclusive to PS4 (like Horizon Zero Dawn), an excellent loyalty program (PlayStation Plus) and Virtual Reality.

Virtual Reality is an entire new business opportunity on its own. Since the technology boomed in 2015, Sony has been one of the leaders in its development. They have used their PS4 software base for their advantage by creating 100 PS4 games for Sony VR Headsets, and have announced 100 more games to come this year. In addition, the Sony VR headsets themselves have a competitive advantage against others as they have great quality at a relatively low price.

Businesses Gaining Traction: Movies, Music and others         


Sony is not standing still with its console sales, on the contrary, the engines for all of the other segments are already being used. This last weekend, Sony Pictures Entertainment’s latest title, Spider-Man: Homecoming opened at No.1 for the first time this year. It pulled $117 million in North American box-office, overachieving both the industry and their own estimates. Its good news for investors, especially with upcoming big movies like “Emoji Movie” and “Flatliners”

On the music aspect, Sony Music is also on the move. They already are one of the biggest record companies in the world, as they own RCA and Columbia and represent big name artists like the Chainsmokers and Future. Yesterday Sony Music struck a crucial deal with Spotify. Although official details of the deal have not been reported, it is expected to be similar to Spotify’s agreement with Universal Music Group where revenue sharing was increased and Spotify’s royalty payments were dropped from 55% to 52%.

In addition to all of the above, Sony is still in the business of developing and manufacturing consumer products. At the CES 2017, Sony announced the following products: the Bravia A1E Series (TV), the Ultra-Short Throw laser light projector and Life Space UX. All three of them are state of the art products and the latter two are rumored to be the best artifacts in imaging history.

Financial and Stock Performance

Sony’s Q1 2017 performance was very well received by investors, so has been the stock performance for the YTD.  Since the start of the year, the stock price has increased by over 37% from 28.28 (which was also the lowest stock price YTD).

The graph below shows the YTD performance for SNE.

(Source: Yahoo! Finance – NYSE:SNE)

SNE’s income statement is very healthy and has been for the last two fiscal years. With operating income being $2.59 billion and $2.62 billion in 2016 and 2015, respectively. Other key financial ratios that usually drive stock prices in the long run are very healthy as well. Return on Equity is at a healthy 3.01%, Return on Assets has risen from deep negative numbers to 1.2%. Net income attributable to common shares to sales is favorable at 1.8%. Its Price/Sales is a healthy 0.60 and its Price/EBITDA at 6.42 is healthy, as a figure of under 10 is usually considered as favorable.

Bullish Algorithmic Forecast for SNE

In line with all of the healthy financial signs, I Know First’s algorithm shows a positive forecast for SNE. According to the algorithm the stock price appears to have potential for increase in the short term (1 month) and keep on that trend towards the long term (3 months and 1 year). Both signal strength and predictability are moderately high and trend upwards.

I think that what is under-appreciated is Sony’s successful targeting of the vital affluent youth demographic. They have put together a combination of games, music and entertainment which is unmatched. If I was a broker I  would give Sony a “Buy” tag and definitely have a higher target price.

Sony is at the right place at the right time.

Past I Know First Forecast Success with SNE

I Know First has made accurate predictions on SNE in the past, such as its bullish article published on November 12th, 2013. That article was written a few days before the launch of PS4 and Xbox One, and stated that the gaming community was going to prefer buying Sony’s product for many different reasons. Following that logic the algorithm predicted a great increase to Sony’s stock in both the short and long runs. Those who trusted it have earned a sweet 137% return. That bullish forecast on SNE was sent to the current I Know First subscribers on November 12th, 2013.

(Source: Google Finance: SNE)

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.


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