Sony Could Rise 37% Partially On The PS Vue, JP Morgan Predicts

In a report published Friday, JP Morgan analyst JJ Park maintained an Overweight rating and price target of ¥4,600 on Sony Corp (TYO: 6758). Sony Corp (ADR) SNE also trades on the New York Stock Exchange. The analyst believes that once PS Vue becomes a significant contributor to earnings for the company, the stock could see 37 percent upside potential.

"We have analyzed Sony's PS Vue's growth potential and competitive landscape, given that Sony is clearly driving PS Vue as a future growth area amid the structural shift from Cable to Online among TV viewers," Park explained.

PS Vue sales are expected to grow by 155 percent CAGR to ¥130 billion over the next couple of years and contribute 8 percent to the total G&NS sales in FY17.

According to the JP Morgan report, "Compared to other online streaming services, PS Vue provides live-streaming TV; it can save favorite shows for 28 days on the cloud; and secure a potential user-base 35 million in the US."

Therefore, the analyst believes that PS Vue is likely to witness benefits of scale when it comes to negotiating with channel providers, server infrastructure and advertisers.

"Although PS Vue has three of the big five broadcast channels, CBS, NBC, and Fox, it doesn't offer sport or Disney channels," Park said, while adding that "it needs to offer services to non-PS console devices."

With the shift from cable to online in the TV industry, the analyst points towards the lackluster performance of traditional Pay-TV stocks over the past few years. On the other hand, online service providers have seen their stock meaningfully outperform the segment.

The analyst expects this trend to continue and PS Vue to become a significant contributor to Sony's total earnings, while also driving margin expansion.