Trading shares of Sony Corp (ADR) (NYSE:SNE) can be gut-wrenching, as the stock tends to make large price moves. Sony stock is up over 42% this year and set a fresh 52-week high of $29.58 on Monday.
There is little to no Wall Street coverage on Sony, as the suit-and-ties hate doing homework on the stock. Sony is based in Japan, but it trades on the NYSE and is still a major tech and mobile player.
As far as its numbers, earnings have been erratic and Sony has missed analyst estimates in the past two quarters. In February, profits of 22 cents per share came up short, as analysts were expecting 51 cents per share.
SNE stock traded higher on the news, however, as Sony cut its loss projections for its full-year earnings. Shares added $2.55 on the move from $23.39 to $25.94 following the announcement.
Last October, shares jumped from $18.72 to $19.82 following its earnings release. Sony reported a quarterly loss of 19 cents per share versus expectations for a profit of 27 cents a share.
Sony has committed itself to improving its balance sheet, and we will find out how those efforts are going at the end of the month. According to Sony’s website, earnings are expected to be released on April 30. The announcements usually come ahead of Wall Street’s open.
Sony’s focus on its channel offering could be a big hit with the recent launch of PlayStation Vue. The service offers live and on-demand TV content over the internet for $49.99 a month. The younger generation is not committing to paying a monthly cable bill, and Sony’s recent offering of the major network stations is a bonus package.
SNE is also trying to improve margins in its movie segment business, and its recent films have performed well.
While the streaming music business continues to be a crowded field, Sony has a booming ecosystem that continues to grow. Given the convenience and lower cost than cable, this unit should make money, but it would be best to improve margins here as well.
Recurring revenue business models can be the bread-and-butter for companies as long as they are in solid uptrends. While Sony has had its share of hits and misses, this dinosaur still makes a lot of cool products and gadgets.
I recommended buying to open the SNE May 31 Calls to my subscribers this week, and the Sony options are currently trading slightly below our entry price at 60 cents.
I like the technicals of our current Sony trade more than I do the fundamentals, but Sony’s commitment to improve shareholder value is a bonus.
Earnings trades can be tricky and these options are likely to be affected by the April 30 earnings announcement. So, there is some additional risk involved. The numbers and guidance are what can drive a stock up or down but, in this case, I think Sony’s upcoming numbers will be better than expected.
InvestorPlace advisor, Rick Rouse, is offering a special free report, “The 5 Golden Rules of Options Investing,” that reveals his rules for options trading success that will help you make double- and triple-digit profits in the months ahead no matter what the market has in store. Just click here to read it right now.
Whether you’re new to options or have years of experience, the trading advice Rick will share can help you lock in bigger gains, find new winning ideas, wring the risk out of your trades and become a more confident and successful options investor. Click here now to download your FREE copy of The 5 Golden Rules of Options Investing.
