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Analyst Blog

Sony Corporation (SNE - Analyst Report) is going from strength to strength and has several growth drivers presently, with the company’s PlayStation 4 video game console being the strongest. The company has gained over 37% in the past one year, and it seems it still has room to go up.

Earlier this month, the entertainment giant launched two fresh versions of its market-leading PlayStation 4 video game console.

Let’s discuss the company’s growth drivers in details and take a look at its new ventures.

Growth Drivers

Talking of Sony, the first thing that strikes us is its flagship PS4 console, which lies at the heart of the company's success. As far as gaming consoles are concerned, Sony is hands-down beating its chief rival Microsoft Corporation (MSFT - Analyst Report) . It has sold 43.4 million PS4 consoles across the world, eclipsing the 22.3 million that Microsoft’s Xbox One achieved, per industry website VGChartz.

Recently, Sony launched two versions of its market-leading PlayStation 4 video game console, as it strives to maintain its sales lead over Microsoft and Nintendo Co. Ltd. (NTDOY - Snapshot Report) . The company also declared its plans to release a more powerful version of the flagship machine this fall, well ahead of similar plans of its rivals next year.

The new high-end console, known as “PlayStation 4 Pro” now, boasts powerful features. Sony also unveiled a lighter, slimmer, more energy-efficient PS4 to replace the original fourth-generation PlayStation machine.

Most importantly, the console is optimized for Sony's upcoming PlayStation VR virtual reality headset. Sony will launch its VR headset in October and the games call for a greater processing power compared to those using standard television displays.

Sony’s wide user base provides the company a tremendous platform for launching new products and services. The PS4 upgrade might just be a well-timed strategy to dominate the VR space, positioning Sony perfectly to reap the benefits of its immense client base as well as the holiday season. We believe that the launches will be highly accretive to Sony’s financials in the coming quarters.

Sony touts its games business to be its biggest growth driver, encouraged by robust console sales, an increase in subscribers to its PlayStation network and the prospects of its VR headset. In the fiscal year ending Mar 2017, the company anticipates its gaming business to generate about 45% of its overall operating profit and estimates selling about 20 million PS4s in that period.

SONY CORP ADR Price and Consensus

Further, the company’s Music and Image Sensors businesses are also high-profit divisions, and Sony is focusing on expanding them. Though the Image Sensor division is a market leader, it was affected due to the Kumamoto earthquakes earlier this year. We believe that the unit will return to a strong growth trajectory soon.

Sony is also focusing on innovating new products and finding new opportunities under its "Business Incubation Group. For example, the company has decided to re-enter the robots business and is investing in the related field of artificial intelligence.

Such developments lead us to believe that Sony’s future is quite bright. The only reasons that the company has been under pressure are macroeconomic factors like weak consumer spending and foreign currency volatility, which are outside the company’s control.

Going forward, we expect Sony to continue leveraging on its growth drivers and unlocking new ones as it continues to shift gears in its growth plans, to reflect changing trends of the fast-evolving industry.

Sony competes with GoPro, Inc. (GPRO - Analyst Report) .

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