On Thursday, BofA Securities exhibited confidence in Sony Corp. (TYO:6758:JP) (NYSE: SONY) shares, raising its price target to JPY18,100 from JPY16,500 while reiterating a Buy rating. The adjustment reflects a more optimistic outlook for the company's earnings potential, particularly in its gaming and semiconductor divisions.
The firm anticipates Sony (NYSE:SONY)'s operating profit (OP) for the fiscal years 2025 to 2027 to climb at a compound annual growth rate (CAGR) of approximately 12%, discounting the financial services sector. This projection is supported by an upward revision of the operating profit estimates for the specified period by 4-5%.
BofA Securities' analysis underscores Sony's potential for revaluation based on its capacity to generate profits, which is driven largely by its content creation and semiconductor businesses. The firm's valuation model, known as the sum-of-the-parts (SOTP), has also undergone adjustments.
Specifically, the fair-value enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple for Sony's music segment has been increased from 18 times to 19 times.
The price target hike comes with no changes to the multiples for Sony's other business segments. This suggests that BofA Securities' raised expectations are rooted in the company's core areas of gaming and semiconductors, which have been identified as primary drivers for the anticipated growth in operating profit.
The new price objective set by BofA Securities indicates a potential upside for Sony shares, as the firm maintains a positive outlook on the company's financial performance in the coming years.
In other recent news, Sony Corporation reported a record fiscal year in 2023, with consolidated sales reaching JPY 13,020.8 billion, operating income totaling JPY 1,208.8 billion, and a net income of JPY 970.6 billion.
Despite a projected decrease in PlayStation 5 sales, Sony's live service game "Helldivers 2" has sold over 12 million units since its release. In the legal realm, Sony Music, alongside Universal Music Group (AS:UMG) and Warner Records, has initiated lawsuits against AI firms Suno and Udio over allegations of mass copyright infringement.
Jefferies maintained a positive outlook on Sony, raising its price target and maintaining a Buy rating following recent discussions with Sony executives, which bolstered confidence in the earnings trajectory for the company's Games and Music divisions. The firm anticipates Sony will benefit from Spotify (NYSE:SPOT)'s price increase, contributing to an uplift in revenue.
Similarly, Oppenheimer maintained its Outperform rating on Sony following its fourth fiscal quarter of 2023 earnings release, which revealed revenues and operating income surpassing market expectations.
Sony's management has emphasized strategies to enhance profitability, including leveraging synergies across its diverse portfolio of businesses and adopting a cautious approach to mergers and acquisitions. These recent developments reflect confidence in Sony's strategic initiatives and financial performance.
InvestingPro Insights
BofA Securities' upbeat stance on Sony is echoed by several metrics and insights from InvestingPro. With a robust market capitalization of $115.78 billion and a Price/Earnings (P/E) ratio of 19.51, Sony is positioned as a competitive player in the market. The company's revenue growth is particularly noteworthy, having expanded by 18.65% over the last twelve months as of Q4 2024. This growth trajectory aligns with BofA's optimistic forecast for Sony's future earnings potential, especially in the gaming and semiconductor sectors.
InvestingPro Tips highlight Sony's consistency in increasing dividends for 9 consecutive years, underscoring its commitment to shareholder returns. Additionally, the stock's recent performance has been strong, with a 10.31% return over the last three months, which may interest investors looking for momentum in their portfolio. For more in-depth analysis and additional InvestingPro Tips, such as Sony's status as a prominent player in the Household Durables industry and its ability to sufficiently cover interest payments with cash flows, visit https://www.investing.com/pro/SONY. There are 12 more InvestingPro Tips available, which can be accessed with the use of coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Overall, the data and insights from InvestingPro complement the positive outlook presented by BofA Securities, offering investors a broader perspective on Sony's financial health and market position.
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