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Bear of the Day: Sony (SONY)

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Sony (SONY - Free Report) , headquartered in Japan, designs, manufactures, and sells consumer and industrial electronic equipment. The company’s product line consists of audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers, and telecommunication equipment.

Currently, the company has six reportable segments: Game & Network Services, Music, Electronic Products and Solutions, Imaging and Sensing Solutions, and Financial Services.

In addition, the company resides in the Zacks Audio Video Production Industry, which currently ranks in the bottom 19% of all industries. Because of its unfavorable ranking, we expect it to underperform the market over the next three to six months.

Share Performance

It’s been a tough stretch for SONY shares year-to-date, decreasing more than 30% in value and extensively underperforming the general market.

Zacks Investment Research
Image Source: Zacks Investment Research

Even over the last month, where the S&P 500 has gained more than 5%, SONY shares have remained lifeless, declining 0.7% in value.

Zacks Investment Research
Image Source: Zacks Investment Research

Growth Estimates & Valuation

Analysts have been overwhelmingly bearish over the last 60 days, lowering their earnings outlook across all timeframes.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom-line estimates display softening. For the upcoming quarter, the $1.15 per share estimate reflects a concerning double-digit 26% decline in earnings from the year-ago quarter.

Additionally, earnings are forecasted to shrink by 6.5% year-over-year in FY23.

Quarterly revenue estimates also display some weakness; the $19.4 billion quarterly sales estimate pencils in a 6% drop from the year-ago quarter.  

Zacks Investment Research
Image Source: Zacks Investment Research

SONY’s current forward price-to-sales ratio resides at 1.1X, representing a 35% discount relative to its Zacks Sector. However, the value is well above its five-year median of 0.9X.

Zacks Investment Research
Image Source: Zacks Investment Research

In addition, the company currently has a Style Score of a D for Value, indicating that shares may be overvalued.

Bottom Line

SONY shares have been the victim of a deep double-digit valuation slash year-to-date. This adverse price action, paired with overwhelmingly negative estimate revisions and an unfavorable industry ranking, paints a grim picture for the company in the short term.

The company is a Zacks Rank #5 (Strong Sell) and a stock that investors will be better off staying away from for now.

Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – the odds of reaping considerable gains are much higher within the companies that carry these ranks.

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