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In this market, it seems that the spotlight is, more often than not, focused on tech titans like Amazon.com, Inc. (AMZN - Free Report) , Alphabet Inc (GOOGL - Free Report) , and NVIDIA Corporation (NVDA - Free Report) . Let’s see if we can widen our aperture to shed light on some high-growth tech stocks that are flying under the radar.

One such name that crops up is Sony Corporation (SNE - Free Report) — the Japanese gaming giant. Sony’s shares have appreciated 56.8% over the past year, as the company enjoys solid momentum in music, games, and semiconductors — which also happen to be its highest-margin segments.

The Catalysts for Growth

Sony is perhaps best known for its Playstation gaming console, televisions, and headphones. In gaming, the company has reportedly sold more than 60 million PlayStation 4 consoles since the launch of the line four years back. This figure is almost double the estimated unit sales of Microsoft Corporation’s (MSFT - Free Report) Xbox One line of consoles, and quadruple of Nintendo Co.'s (NTDOY - Free Report) Wii U console. PS4 clearly emerges as the leader in the current generation of video game consoles.

The latest data, according to IDC, projects dedicated augmented reality and virtual reality headsets to be up to 100 million units by 2021. This is up from last year’s roughly 10 million shipments and reflects a five-year CAGR of a whopping 57.7%. Sony seems exceptionally well positioned to capitalize on this trend.

Console sales generate additional revenues from game downloads and subscription fees for online playing. In the recently reported fiscal second-quarter results, Sony’s Game & Network Services segment climbed an impressive 35.4% year over year. Burgeoning demand for next-generation video game consoles, explosion in eSports and the massive digital shift in the video game industry remain tailwinds for the segment. Further, augmented and virtual reality might prove to be catalysts for Sony’s gaming business.

Semiconductors were another strong growth driver for the company, with sales at the segment jumping nearly 18%, to ¥228.4 billion, on demand for camera chips for smartphones, including Apple’s iPhone. Semiconductors carry robust margins and expanding image sensors demand for mobile products should boost its growth prospects.

Its Music segment also experienced a 37.5% surge in sales on a year-over-year basis, as it benefited from elevated Visual Media and Platform sales, and a steady rise in digital streaming revenues. Sony's TV business is set to benefit from an industry upswing as more and more consumers upgrade to OLED and 4K screens.

Sony actually managed to chart positive growth across its operating segments in the fiscal second quarter. Home entertainment revenues were up 28% on high demand for the company’s high-end TV sets, while the movie studios enjoyed a 27% jump, owing to the blockbuster success of Spider-Man: Homecoming.

All in all, we can see that Sony’s high-margin segments are accelerating at a swift pace, which implies healthy earnings growth prospects over the coming years.

Recent Projections

Sony's fiscal second-quarter sales and operating revenues rose 22.1% year over year, while earnings beat the Zacks Consensus Estimate by a striking 66.7%. Operating income also rose a whopping 346.4% from the year-ago quarter. Furthermore, Sony raised its full-year revenue guidance by 2.4%, while its profit projection was increased by about 30%.

Sony now expects the growth in its Gaming, Music, Semiconductors and Home entertainment businesses to be higher than previously expected in August. Overall, the GN&S segment is anticipated to benefit from an expected increase in PS4 hardware sales as well as network sales, while Music sales are predicted to be driven by higher-than-expected Visual Media and Platform sales, as well as Recorded Music sales. Image sensor unit sales for mobile products will likely drive Semiconductors sales higher, while an expected increase in television unit sales will benefit HE&S revenues.

Summing Up

Sony has really been firing on all cylinders to boost profitability, and the results are slowly beginning to manifest themselves in better operating income and margin performance. Sony has created an impressive ecosystem of the PlayStation family, and its restructuring efforts and streamlined operations will help generate sustainable profit, thus propelling future growth.

The industry trends are in Sony’s favor as well. The rise of autonomous cars and factory robots can help its semiconductors business move beyond smartphones. In gaming, soaring software and service revenues can extend the PlayStation 4 up-cycle and smooth out profits between new hardware launches.

The company’s quarterly numbers have also been coming in well ahead of estimates, and future estimates have been creeping higher. This Zacks Rank #3 (Hold) company has scored three striking earnings beats over the trailing four quarters, for an average positive surprise of 47.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, analysts have also revised the company’s estimates higher in recent times. The Zacks Consensus Estimate for fiscal 2018 has gone up from $2.36 recorded a month back to $2.62 today. This indicates that analysts are feeling optimistic about the stock.

We believe that investors should keep an eye on this stock, as there is strong potential for appreciation, as the market catches up with its growth drivers.

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