Sony (NYSE:SNE) unquestionably is a good business. And at less than 13x forward consensus EPS estimates, Sony stock looks awfully cheap as well.

But going back to late last year, I’ve remained somewhat skeptical toward Sony stock. While investors are familiar with the company’s gaming and TV divisions, negative long-term trends will pressure other aspects of Sony’s business. Secondly, as I wrote in April, there seem better (or at least easier) plays on the positive trends.

Indeed, Sony’s own targets for fiscal 2020 and fiscal 2021 don’t suggest anything like torrid growth – and suggest surprising weakness in a few key areas.

There’s enough in the projections to see Sony stock grinding out additional upside. But there’s not enough to make Sony stock all that compelling at the moment.

Struggling Headline Businesses?

At its IR Day in May, Sony management laid out the mid-term course for the business. Overall, the news seems reasonably positive. The midpoint of targets suggest that Sony could reach around 950 billion yen in operating income (about US$8.5 billion), up from a guided 720 billion yen this year.

But the targets also suggest a rather slow pace of top-line growth for Sony, with earnings coming from continuing efforts toward the turnaround that Josh Enomoto detailed back in February. Indeed, two of the better-known businesses look like they have stalled out.

In the gaming business, Sony suggests profits to decline going forward, to 130-170 billion yen from an estimated 180 billion yen in FY18. Virtual reality continues to be a disappointment. For example, Microsoft (NASDAQ:MSFT) paused support for VR in the Xbox and the console cycle isn’t in Sony’s favor.

In Music, Sony sees limited growth in both revenue and operating profit. Growth of streaming services like Pandora (NYSE:P) and Spotify (NYSE:SPOT) offers a tailwind. But physical sales will continue to decline.

Together, those two businesses alone should generate about a quarter of projected FY21 operating income (before corporate costs). And combined, Sony would likely be happy if profits simply stayed flat over the next three years.

The Hardware Question

Another 20%+ comes from what Sony calls Branded Hardware. In Home Entertainment & Sound, Sony plans to arrest declining revenue and salvage margins.

But with TV prices continuing to fall, and competition from Chinese and Korean competitors intense, that may be easier said than done. Imaging Solutions is a similar story, with Sony projecting some growth. But a shrinking camera market could provide pressure.

Meanwhile, the Mobile Communications segment continues to see revenue decline and the business remains unprofitable. Sony is targeting 20-30 billion yen in operating profit by FY20, against a loss this year.

But that projection, too, assumes that a shrinking business can finally stabilize. And though the head of Sony’s mobile division has insisted that Sony will never exit the mobile business, additional losses going forward might finally change management’s mind (particularly with a new CEO installed in February).

The common denominator across the hardware segments is that they are tough businesses. Success looks like simply driving any revenue growth, and focusing on costs to create some margin expansion. But with prices falling across the board, that’s easier said than done.

Sony’s Growth Businesses

In sum, basically half the company has to drive growth in the near-term – and likely the long-term as well, barring a rebound in the gaming business.

The biggest driver in the near-term is Sony’s semiconductor business. Sony is targeting two-year operating profit growth of at least 50% and as much as 90%. New opportunities in automotive and factory automation are supposed to drive demand for the company’s image sensors.

Sony Pictures appears to have some promise as well, between key franchises and margin expansion for cost control. But that business likely generates 5-6% of operating profit.

And there’s the financial services business often forgotten by investors, but Sony’s second-largest business at the moment from a profit standpoint. That segment likely should drive some level of growth going forward. But like its peers, it’s going to be slow and steady – at best.

Concerns for Sony Stock

Segment-by-segment, then, the concerns surrounding Sony stock become apparent. There’s simply not a single, major growth business here, save perhaps for the semiconductor segment. Sony probably can grind out some growth: its targets suggest ~10% annual EBIT growth over the next 2-3 years.

That’s probably enough to get SNE stock to $70 – and to provide a nice return for investors.

But there are risks here as well. The Financial Services business largely serves an aging demographic in a country with still-negative interest rates. Tariffs could affect Sony’s export-heavy revenue.

Chinese competition is moving from hardware into the semiconductor space. And it’s possible – even though recent history suggests otherwise – that Sony could miss its targets, or that cost-cutting has a bigger effect on sales than the company projects.

Meanwhile, there’s the question why Sony itself is the best play in its growth areas. Given that ~one-third of mid-term growth comes from the semiconductor business, why not buy Nvidia (NASDAQ:NVDA) or Advanced Micro Devices (NASDAQ:AMD)?

NVDA adds gaming exposure as well for investors who believe in that long-term trend. Financial services is key – aren’t U.S. banks easier (and higher-yielding) plays, particularly after a recent sell-off?

I see why Sony could be seen as a solid play, and I wouldn’t be at all surprised to see double-digit returns from SNE stock over the next few years. But asking for more than that seems too aggressive even assuming management targets at hit. I still don’t see Sony stock as a compelling play, and I still think investors can do better elsewhere.

As of this writing, Vince Martin has no positions in any securities mentioned.