With the once red-hot technology sector experiencing a period of heightened volatility, shares of Sony Corp. (SNE) could prove themselves a safe bet for investors seeking to harness above-average returns. Ahead of the electronic giant's upcoming earnings report, the consensus on the Street implies a near 24% gain for Sony stock over the next 12 months, according to data from Reuters.
The average analyst rates Sony at outperform, with a mean price target at 7,730.50 Japanese yen, or $69.15, compared to the average price target three months ago, at 6,587.27 yen, or $58.87. Trading up 1.3% on Monday morning at $56.24, shares of the Asian multinational conglomerate reflect a 25% return year-to-date (YTD), sharply outperforming the S&P 500's 3.7% increase and the tech-focused Nasdaq Composite Index's 8.5% rise over the same period.
Japanese Electronics Leader to Gain on Gaming, Image Sensor Demand
The Street has become increasingly bullish on Sony's growth prospects in the gaming and image sensor business, expecting the firm to report a record operating profit for the fiscal year ending March 31, 2019.
On Friday, an analyst at Nomura Instinet lifted their price forecast for Sony stock to 8,000 yen, or $71.42, reflecting a 27% upside from current levels, as outlined by CNBC.
Nomura's Yu Okazaki attributed his optimistic forecast to Sony's strategic shift to double down on content, noting success with the start of its recently launched PlayStation 4 game "Spider-Man" and the release of the film "Venom."
"Strong performance in these content-related areas means that near-term earnings have probably been better than we had previously expected," wrote the analyst.
Okazaki noted that while a strengthening U.S. dollar remains a risk for hardware manufacturers, Sony's "high-value-added strategy" should outweigh the negative headwind.
Nomura's bullish call echoes an upbeat report from analysts at Credit Suisse, who increased their rating on Sony shares from neutral to outperform last month.
While Sony is set to benefit from high growth business such as image sensors and gaming, with the latter accounting for over 24% of its top line and posting a solid 35.6% year-over-year (YOY) increase in the quarter ended June 30, bears have warned on a slowdown in the global smartphone industry market as well as heightened competitive pressure in other key industries. Despite risks, the average earnings forecast for Sony's fiscal year 2019 calls for record operating profit at 794.71 billion yen, or $7.1 billion, and implying an 8.9% YOY increase from 729.9 billion yen, or $6.52 billion reported in fiscal year 2018.