On Friday, Jefferies maintained a positive outlook on Sony Corp (TYO:6758). (6785:JP) (NYSE: SONY), raising its price target from JPY19,250.00 to JPY19,450.00 while keeping a Buy rating on the stock. The firm's optimism stems from recent discussions with Sony (NYSE:SONY) executives, which bolstered confidence in the earnings trajectory for the company's Games and Music divisions.
The analyst from Jefferies highlighted that contrary to the belief held by some newer investors that Sony's Game business is in decline, the reality is quite the opposite. The growth prospects for the gaming division are strong, supported by software growth, subscription revenue growth, and potential margin expansion. This outlook challenges the guidance suggesting a decline in PlayStation 5 hardware sales.
In the music sector, the firm anticipates Sony will benefit from Spotify (NYSE:SPOT)'s price increase. This potential uplift in revenue contributed to the decision to adjust Sony's estimates and price target upward.
The analyst's remarks underscore a positive future for Sony's gaming business, emphasizing that the current narrative of decline does not align with the company's actual performance and potential. Additionally, the music division is expected to see a positive impact from external pricing strategies in the industry, such as those by Spotify.
Jefferies' revised price target reflects a modest increase but signifies continued confidence in Sony's ability to grow its earnings across key entertainment sectors. The firm's analysis suggests that Sony is well-positioned to capitalize on its strengths in the gaming and music markets.
In other recent news, Sony Group Corporation has experienced significant developments. The company reported a record fiscal year in 2023, with consolidated sales reaching JPY 13,020.8 billion, operating income hitting JPY 1,208.8 billion, and a net income of JPY 970.6 billion. Despite a decrease in PlayStation 5 sales, Sony has seen success with its live service game "Helldivers 2," which has sold over 12 million units since its release.
Sony has also been the focus of legal proceedings, with major music corporations Sony Music, Universal Music Group (AS:UMG), and Warner Records filing lawsuits against artificial intelligence firms Suno and Udio over allegations of mass copyright infringement. The outcome of these cases could have implications for the use of copyrighted material in training AI systems.
Analysts have maintained a positive outlook on Sony, with Jefferies reiterating a Buy rating and Oppenheimer maintaining an Outperform rating. These affirmations reflect confidence in Sony's strategic initiatives and financial performance. 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.
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