Sony shares are at a 19-year high. Analysts are bullish on PlayStation 5, say stock could rally 20%

Sony can quickly beat this, they have a lot of buffer in the video games division. PlayStation 5 will be definitely the company’s crucial driver for this. It is the start of a new console generation, the previous PlayStation was released 7 years back, and the PlayStation 5 buzz is already through the roof. The company forecasts a modest year-on-year rise of 0.6% in the gaming department’s operating earnings at 240 billion yen for its fiscal year that concludes at end March 2021.

That is even as Sony approximates that group profit to decline. That was a more than 82% year-on-year rise, even as sales of consoles declined. Revenue for the gaming company is anticipated to jump over 26% year-on-year to 2.5 trillion yen. Its shares are sitting at their greatest level since June 2001, regardless of a dip on Wednesday. Experts say there might be additional upside in the next year as the company prepares to introduce the flagship PlayStation 5 video games console.

Amit Garg, a senior expert of Japan equities at CLSA, expects Sony to sell 6.7 million units of the console in the existing financial year and stated the company’s own revenue forecast for the video gaming unit will likely be beaten, given the strength in the recent quarter. The Japanese company stated the brand-new console will be offered in time for the 2020 holiday, just as Microsoft plans to launch its new Xbox Series X. Still, on Wednesday, the Japanese-listed stock was around 2.2% lower at 8,495.00 yen at 13.12 p.m. Tokyo time, though CLSA’s Garg sees this as a short-term blip, given shares stand at a 19-year high.

Sony is also gearing up to launch the PlayStation 5, its newest console since the PlayStation 4 in 2013.

The Japanese electronics published better-than-expected incomes on Tuesday for the April to June quarter and provided an outlook ahead of agreement. Garg said he has a 12-month price target on Sony of 10,400 yen. If realized, that would be a nearly 19.5% rise from Wednesday’s opening cost of 8,704 yen. Experts expect the company shares to hit 9,538.95 yen ($90.35) in the next 12 months, around 9.5% upside from Wednesday’s opening cost, buoyed by the company’s strong gaming company.

Under the 2 CEOs, Sony has actually put a large emphasis on its gaming division. In its financial first quarter that just ended, the company’s video game and network services unit accounted for about 54% of overall operating profit. Profit tipped over 48% year-on-year in the quarter ending in June to 25.4 billion yen. And company forecasts that this company will see earnings decrease over 44% for the financial year.

These problems will probably disappear as the covid concerns are relieved and as they win more consumers and re-boost their market share into next year. Sony saw declines in profits in other essential companies consisting of films, music, and CMOS. The latter has been a critical company for Sony in current times given its proficiency in smartphone electronic camera sensors, which it sells to clients consisting of Huawei and Apple.

CMOS refers to the type of image sensor chip Sony offers to smartphone makers.

Sony’s membership service called PlayStation Plus, saw customer numbers reach 44.9 million in the April to June quarter, greater than 36.2 million in the same period last year. 9,650 yen price target, if struck, would be almost 11% advantage. The company offering 15 million to 20 million systems in the PlayStation 5s first year of sales. Its 19-year high share rate is a vote of self-confidence by investors in the multi-year turnaround plan that was initiated by previous CEO Kazuo Hirai.

Hirai took the role in 2012, and was succeeded by Kenichiro Yoshida in 2018. If you look at a few of the recent trends, specifically strong user engagement and strength in digital sales, most of these patterns will rollover to the PlayStation 5, giving good incomes momentum for Sony in the next 2 to 3 years. These trends will assist its earnings going forward.

Across the board if you look at games in particular, what was really impressive was the strong, over 80% growth in the digital content sales which drove strong earnings development both in the very first quarter, and it will raise expectations for the full year. With people staying home more in the second quarter of the year due to covid-related shutdowns around the globe, Sony sold 91 million video games. Of the total variety of video games sold, 74% were from digital downloads, the highest number on record.