On Friday, Bernstein analysts maintained a positive outlook on Sony Corp (TYO:6758) (6785:JP) (NYSE: SONY), reiterating an Outperform rating and a price target of JPY3,900.00. The firm's analyst, Robin Zhu, provided a detailed analysis of the company's gaming division, particularly the Playstation brand, which is seen as a critical component of Sony (NYSE:SONY)'s success.
Zhu highlighted the Playstation 5's dominance in the ninth-generation console hardware market over its competitor, Xbox. With sales expected to soon surpass 75 million units, the PS5's growing installed base is a significant factor in Bernstein's bullish stance. The analyst anticipates a boost in user engagement and revenue, driven by the release of AAA first-party games and the highly anticipated Grand Theft Auto VI (GTA VI) after a brief hiatus in the fiscal year ending March 2025. According to InvestingPro, Sony maintains a prominent position in the Household Durables industry, with 12 additional exclusive insights available to subscribers.
Furthermore, Zhu predicts an improvement in Sony's earnings, fueled by cost-saving measures and increased efficiency within the company. Bernstein's projections for Sony's Game & Network Services (G&NS) operating income stand at JPY470 billion for the fiscal year ending March 2026, which surpasses the consensus estimate of JPY423 billion. Zhu suggests that a particularly optimistic scenario for Sony could begin with earnings figures that "start with a five-handle," indicating numbers exceeding JPY500 billion.
This positive assessment from Bernstein comes at a time when Sony's gaming division is poised to capitalize on its strong market position and upcoming content releases. The reaffirmation of the Outperform rating and price target underscores the firm's confidence in Sony's potential for continued growth and profitability in the gaming sector.
In other recent news, Sony's earnings and revenue results have shown notable developments. The company reported a 6% increase in net profit and a 2% rise in revenue for the first quarter of fiscal year 2025. Despite a 22% decline in PlayStation 5 sales, Sony's adjusted EBITDA grew by 42% year-over-year, bolstered by stronger than expected sales of third-party games. On the merger front, Sony Music is reportedly close to finalizing a deal estimated at $500 million for the rights to Pink Floyd's recorded music.
However, Sony shares fell after Electronic Arts (NASDAQ:EA) cut its guidance, potentially translating to a ¥10-15 billion hit to Sony's operating profit. Macquarie estimates that the cut in EA's full-year guidance could lead to a more than 1.5% negative impact on Sony's operating profit. Despite this, Macquarie maintains a positive outlook for Sony's Game & Network Services (G&NS) segment into the fiscal year ending March 2026.
Morgan Stanley (NYSE:MS) and Oppenheimer have recently adjusted their outlook on Sony's stock. Morgan Stanley increased the price target for Sony shares to JPY4,000 from the previous JPY3,400, while Oppenheimer significantly reduced the price target to $25.00 from the previous $108.00, following Sony's F2Q24 earnings report. These are some of the recent developments in Sony's business landscape.
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