Sony (NYSE:SNE) beat earnings estimates even while some units fell flat. The company earned $2.6 billion and raised its profit forecast for the year to $7.7 billion. Most of the profit came from image sensors, used in high-end smartphone cameras.
Sony shares are up 26% so far in 2019 and got a 3% boost from the latest numbers. Sony opened for trade Oct. 31 at a little over $61 per share with a market capitalization of almost $72 billion.
Music and Movies Up, Gaming Down
The idea behind “One Sony” is that one group’s up quarter can offset another group’s down quarter.
In the September quarter, the second of its 2020 fiscal year, Sony gaming profits slid 28% but profits from music rose 10%, as revenue from streaming music rose 21%.
Movies were another strength. Spider Man: Far From Home and Once Upon a Time in Hollywood helped the movie division deliver profits of $366 million for the quarter, with revenue up 12%. Total revenue from Sony Pictures, which also makes TV shows, was $1.3 billion, up from $980 million for the same quarter last year.
The strength in music, movies and sensors will let Sony address the problems with gaming. The company is already committing capital to producing a PlayStation 5, due for release around the 2020 holiday season. The new system will feature a new controller, better graphics and a new user interface.
Sony’s PlayStation 4 has now sold 100 million units, but not all the news there is good. Sony is shutting down Playstation Vue, its “skinny bundle” cable service. It tried to sell Vue for months, through Bank of America (NYSE:BAC), but found no takers. The service had about 500,000 customers.
Instead, Sony is looking to buy video game studios. Sony has already bought Insomniac Games, which makes Spider-Man games. It is also said to be kicking the tires on Remedy, Bluepoint and Housemarque. Game development costs are constantly rising, and Sony’s intellectual property can help guarantee sales.
Tech or Content?
To keep succeeding, Yoshida must balance the capital demands of hardware, software, computing and consumer electronics.
Right now, Sony’s investment priorities are for hardware, with the PlayStation and image sensors, for which Sony is building a new factory. Yoshida believes there are markets beyond smartphones for the semiconductor sensors, in self-driving cars, medical devices and other products using 5G technology and artificial intelligence.
The Bottom Line on Sony Stock
Despite owning a big chunk of Hollywood, Sony is a Japanese company and is not going to be broken up at the behest of American hedge funds.
This leaves hedge funds without the quick profits for which they buy the stock. Having fingers in so many pies — gains in one area offsetting losses elsewhere — can make predicting Sony’s performance dicey.
Buying Sony stock is a bet on capital gains.
Still, despite volatility which has seen Sony stock trade as low as $46 per share earlier this year, patient investors have been rewarded. Sony is up almost 200% over the last five years, about 40% per year. The Japanese seem to know what they’re doing.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.