Is Sony Corp Finally Becoming A High-Profit Company?

Sony Corp (ADR) SNE is making a transformation to a high-profit company as its shift toward the entertainment business is progressing well, Goldman said, while reaffirming its Buy rating on the stock.

Goldman said Sony, at its IR day, maintained its FY3/18 operating profit target of ¥500 billion. The FY3/18 game business operating profit outlook of ¥144 billion–¥190 billion is high compared to Goldman's prior forecast of ¥145.3 billion.

"We note a higher-than-expected game business growth outlook and a constructive movie business outlook," analyst Masaru Sugiyama wrote in a note.

The Power Of Currency

However, the analyst noted concerns exist about recent yen strength and changes in consumer activity.

"Sony's operating profit forex sensitivity is ¥5.0 billion/-¥5.5 billion for each ¥1 rise in the yen's value against the USD/EUR," Sugiyama explained.

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"[Y]en appreciation against EM currencies has a large negative impact on the mobile communication, imaging products & solutions, and home entertainment & sound businesses, and we estimate that rates of ¥102/US$ and ¥113/EUR would have a roughly ¥50 billion negative impact on consolidated op. profits," Sugiyama elaborated.

As such, the analyst cut FY3/17 operating profit estimate to ¥310.1 billion.

Further, the analyst highlighted Sony's rich lineup of in-house titles this year, including "Gran Turismo," and should continue to reap benefits in FY3/18 as well. The new "Spiderman" movie is scheduled for 2017.

The analyst cut the target price to ¥4,100 from ¥4,200.

At the time of writing, ADRs of Sony were down 0.72 percent to $29.13.