This week’s companies to watch segment involves an electronics giant that took a recent (unplanned and unavoidable) hit, but is steadily making its way back. This week we are focusing on Sony.
Sony’s troubles began in April of this year when a 7.0 earthquake rocked Sony’s headquarters in Japan. This disrupted their output of electronics and diverted millions of Yen to the repair efforts of both Sony’s headquarters, and the surrounding Japanese area. Because of this repair effort, and combined with a slowing demand for smartphones (and their components), Sony ended the the quarter with a pretty big profit loss.
“There was no telling how much the damage from the quake would be, so the profit was bound to fall below consensus,” said Atul Goyal, an analyst at Jefferies Group.
However, despite the profit loss, Sony’s shares have continued to rise in the last 4 months. This is due to a positive outlook surrounding Sony’s dominance in the video game market, as well as the the need for sensors and electronics for future technological feats (like driverless cars).
Goyal went on to explain, “The company’s guidance is still conservative. Sony’s movie, music and games businesses will do great this year, while prospects for image sensors will improve longer term.”
On the Way Up
Sony may have taken a hit, but their future looks bright. Sony is currently leading the way in the video game console wars, and analysts are expecting the PlayStation’s virtual reality headset to help keep it that way. The obvious positive of winning console wars, and introducing new products like PlayStation VR, is that it not only increases new PlayStation users, but it also converts users from other consoles. However, the unnamed positive is that those users join subscription-based services like the PlayStation network, which provides much-needed regular revenue to the company.
The great unknown for Sony is their participation in the future of technology. Analysts are seeing the demand for smartphones to go down, but the demand for other smart accessories (Google Home, Amazon Echo, Driverless cars, etc.) going up. Sony is already a major player in providing the components that make up these technologies, and analysts are banking on Sony being a major player in tech’s future.