Trade SONY Stocks
Sony Corporation (TYO: 6758) is a Japanese multinational conglomerate with businesses that include electronics, gaming, entertainment, and financial services. Sony has become a household name given it owns the largest video game console and game publishing business in the world, as well as the largest music entertainment business in the world. It is also one of the top producers of consumer electronics and has a leading film and television studio. Fortune magazine ranked it number 97 in its Fortune Global 500 list for 2018, but in 2019 it dropped to number 116.
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Sony Corporation is the parent company of Sony Group, with Sony Group consisting of seven distinct business units. These are as follows:
- Game Network & Services – Entertainment Systems, Software, Network Services
- Music – Recorded Music, Music Publishing, Visual Media and Platform
- Pictures – Motion Pictures, Television Production, Media Networks
- Electronics Products & Solutions – Mobile Phone, Internet Services, Digital Imaging Products, Professional Solutions, Medical, Televisions, Audio, Video
- Imaging & Sensing Solutions – Image Sensors
- Financial Services – Life Insurance, Non-life Insurance, Banking
- Others – Recording Media, Batteries, Disk Manufacturing
This broad diversity makes Sony the most comprehensive entertainment company in the world.
Sony’s Humble Beginnings
Sony was started immediately following WWII in 1946. An aspiring entrepreneur named Masaru Ibuka opened an electronics store in a Tokyo department store. At the start, the company had total capital of ¥190,000 and just eight employees. Soon after the shop was established, Ibuka was joined by Akio Morita and the two established the company Tokyo Tsushin Kogyo or TTK. The company flourished, and in 1958 changed its name to Sony.
During the 1950s, it was very unusual for a Japanese company to use Latin letters to spell the name of its company. Almost unanimously Japanese companies of the time would use kanji for their names. Ibuka and Morita’s choice to use Latin letters wasn’t without some controversy and opposition either.
TTK’s bank at the time was Mitsui, and they had strong negative feelings about the name. They were pushing for a name that would emphasize electronics, but Morita was staunch in his decision to avoid tying the company name to any specific industry. Eventually, Morita got approval from both the bank and Ibuka to change the name of the company to Sony.
Historically, Sony has avoided using industry standards for recording and storage, preferring instead to develop its own in-house technologies. This has led to Sony creating and introducing some of the most popular recording and storage formats, including the floppy disk, the compact disc, and the Blu-ray disc. Sony also introduced the first portable music system when they launched the Walkman in 1979.
In addition to those, Sony was also responsible for the Betamax video recording standard which lost out to VHS in the video tape wars.
Sony Interactive Entertainment
The Sony Interactive Entertainment unit generates roughly 25% of the revenues for Sony Corporation. This business is best known for the Sony PlayStation gaming consoles. Interestingly, that line of hardware came from a failed partnership with rival Nintendo.
In the 1990s, Nintendo asked Sony to develop an add-on for its gaming console that would allow the console to play compact discs. Sony created the add-on and a dedicated console which they named “PlayStation.”
Unfortunately for Nintendo, a disagreement over software licensing caused the partnership to dissolve and Sony continued the project on its own.
That led to the launch of the first PlayStation in 1994. The original PlayStation was a blockbuster product, breaking Nintendo’s lead in the gaming console market and rapidly achieving 61% of global console sales.
Six years later the PlayStation 2 was revealed, and it was even more successful. In fact, it has been the most successful gaming console of all time, with more than 150 million PlayStation 2 units sold as of 2011.
In 2020, the PlayStation 5 will be released, and the expectations are that it, too, will sell over 100 million units.
Sony Entertainment encompasses both the music side of Sony through Sony Music Group, and the movie/television business through Sony Pictures Entertainment. In 2018, Sony Entertainment accounted for roughly 20% of Sony’s revenues.
Sony Entertainment has been ranked fourth in box office sales in 2018 and 2019, although in 2019 they had the seventh and tenth top grossing movies of the year. Sony Entertainment holds many notable movie franchises including Spiderman, Men in Black, Jumanji, and The Karate Kid. In television, it’s been responsible for both Wheel of Fortune and Jeopardy.
Sony Music Entertainment is the second largest global record company and is controlled by the U.S. subsidiary of Sony, Sony Corporation of America. In 1988, Sony made an excellent move by purchasing CBS Record Group for $2 billion. It was one of Sony’s largest acquisitions ever and gave Sony the rights to Michael Jackson’s ATV catalogue. It was this purchase that laid the foundation for the formation of Sony Music Entertainment in 1991.
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Sony share price History
Sony’s stock (TYO: 6758) began trading on the Tokyo Stock Exchange back in 1958 and is also listed at the American NYSE, which is the preferred stock for trading at AvaTrade. Obviously, we won’t go back that far in the price history of Sony’s stock.
Looking back, the all-time high for Sony share price was at ¥16,950 in February 2000. This was at the very end of the dot-com boom, and with Sony involved in gaming, semiconductors, and computers at the time the surge from ¥3,615 in October 1998 to the high just 16 months later isn’t too surprising. The drop off the high was just as dramatic as the stock fell in four separate legs, finally reaching ¥2,720 in April 2003.
A Wasted Decade
That wasn’t even the lowest point for Sony share price. Although the stock would recover from the 2003 lows and trade above ¥7,000 by May 2007, those gains weren’t made to last either. The global financial crisis hit Sony stocks too, and after trading steadily lower, it finally bottomed out at just ¥772 in November 2012.
The Bull Case for Sony share price
Since then, the shares have been moving higher with occasional dips. The stock is on its third leg higher as of January 2020, trading around the ¥7,900 level which is its highest since July 2001. The gains have been paralleling the move in the broader Nikkei, although Sony shares have handily outpaced the Nikkei in 2019. Sony shares added 40.9% in 2019, more than doubling the return from the Nikkei.
Sony Stocks Trading Ideas
There are a few bullish fundamentals recommending Sony stocks in 2020.
The first of these is the ongoing broad rally in Japanese stocks, which is expected to continue through 2020. Not only does the negative interest rates in Japan help support equities, since it makes borrowing so inexpensive for Japanese companies, it will also help keep the Yen weaker.
A weak Yen helps multinational companies like Sony by making them more competitive overseas, and by making repatriation of funds earned outside Japan more valuable. The combination of broad-based strength for equities and a weaker Yen will continue to support gains for Sony.
Another very strong fundamental driver comes from Sony Interactive, which will release the next generation PlayStation 5 console in late 2020.
The Sony stocks can be expected to rally ahead of the release of the new console, which will also drive gains in software sales as new and updated games will be released for the new console.
Based on the history of Sony share price around the release of new PlayStation models, the rally sparked by this event should last 12-18 months.
Consider, too, that out of 23 analysts covering Sony, 20 recommend the stock as a buy and there are no sell recommendations. The median price target for the stock represents an 11.8% premium over the early January 2020 price.
On a technical basis, after passing through the resistance at the ¥7,100 level, Sony stocks should be clear until reaching the next serious resistance at the ¥10,000 level.
Sony is one of the top global stocks and a global household name. With so many fundamentals in its favour, it looks like a good prospect for outperformance in 2020 and perhaps beyond. Traders interested in Sony stocks have an easy way to get access to the shares by opening an account at AvaTrade and trading stocks like Sony when price looks attractive.
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