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On Tuesday, CFRA analyst Hazim Bahari updated the firm’s outlook on Sony (NYSE: NYSE:SONY), increasing the price target to $30.00 from the previous $29.00 while maintaining a Buy rating. The stock, currently trading at $26.53 with a P/E ratio of 20.07, has shown strong momentum, trading near its 52-week high. The new target is based on a forward Price-to-Earnings (P/E) ratio of 23 times for the fiscal year ending March 2026, which is still above Sony’s five-year average P/E of 19 times. According to InvestingPro analysis, Sony appears slightly overvalued at current levels. Despite a slight reduction in the earnings per American Depositary Share (EPADS) forecast for the same fiscal year, from JPY 189 to JPY 184, CFRA initiated an EPADS estimate of JPY 198 for fiscal year 2027.
CFRA’s analysis anticipates a 1% revenue contraction for Sony in the fiscal year 2026-2027, followed by a 3% growth. This projection takes into account the expected near-term challenges posed by U.S. tariff policies. However, the firm forecasts stable growth within Sony’s Game & Network Services (G&NS) segment, driven by network services and the launch of major first-party titles. The Music segment is also expected to continue its high-single-digit growth, measured in U.S. dollars.
The Pictures segment is predicted to gain momentum from major intellectual property releases and the expansion of Crunchyroll, a streaming platform for anime and manga. CFRA projects that Sony’s operating margins will improve to 11.0% in fiscal year 2026 and further to 11.5% in fiscal year 2027. These improvements are anticipated to stem from a more favorable business mix and increased operational efficiencies.
The report also touches on Sony’s strategic shift towards an asset-light, entertainment-focused business model. CFRA believes that this pivot, especially considering Sony’s plan to spin-off its Financials division, will enhance the company’s long-term Return on Invested Capital (ROIC), which currently stands at 9%. InvestingPro data reveals Sony operates with a moderate debt level and has maintained dividend payments for 46 consecutive years, demonstrating strong financial stability. For deeper insights into Sony’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Sony Corp. (TYO:6758) has reported a mixed financial performance for its fourth quarter, with a 24% decline in revenue to ¥2.63 trillion, influenced by the planned spin-off of its Financial Services segment. Despite this, when excluding the Financial Services division, Sony’s sales remained stable at ¥2.81 trillion, and operating income grew by 6% year-over-year to ¥215 billion. For the full fiscal year 2024, Sony’s revenue, excluding the Financial Services segment, increased by 7% to ¥12.04 trillion, with a 23% rise in operating income to ¥1.28 trillion. Analysts at Benchmark have maintained a Buy rating with a price target of JPY4,000.00, reflecting confidence in Sony’s core business.
Meanwhile, Bernstein analysts have maintained an Outperform rating for Sony, with a price target of JPY4,600.00, citing robust growth in its gaming business and other divisions like image sensors, music, and anime. The firm highlighted Sony’s commitment to capital discipline and profitability, noting that these factors contribute to a positive outlook for the company. Additionally, there are reports of Sony considering a spinoff of its semiconductor business, although the company has not confirmed any specific plans, dismissing the reports as speculative.
Sony is also in the process of spinning off its financial arm, with the semiconductor spinoff potentially aligning with its focus on the entertainment sector. The company may retain a minority stake in Sony Semiconductor Solutions if the spinoff proceeds. These developments are being closely monitored by investors as they evaluate Sony’s strategic shifts and financial health.
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