With shares of Sony (NYSE:SNE) trading around $18, is SNE an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Sony is involved in the electronics, games, entertainment, and financial businesses. The company operates in several different segments: Consumer Products Services, Professional Device Solutions, Movie, Music, Finance, Mobile, and Other. Through its segments, Sony is able to provide a wide range of products and services. These products include televisions, cameras, personal computers, game consoles, navigation systems, audio and video equipment, software, phones, and media platforms. The company brings new technologies to the hands of your average player as well as professional users. Look for Sony to continue to be a top choice for avid technology adopters worldwide.
Amid overwhelming demand for its next generation console, Sony announced last week that demand for the well-received PlayStation 4 will outstrip supply at least until the summer of this year. In an interview with The Wall Street Journal at the Game Developers Conference in San Francisco last week, Andrew House, CEO of Sony Computer Entertainment, said the shortage could continue well into the summer. Robust demand for the PS4 in Europe and the U.S., coupled with the launch in Japan, has contributed to the shortage, claimed House.
“We’re struggling to keep up with demand,” House stated in statement regarding the supply shortage. “Conservatively, as we get into the early summer months, we’ll be closer to a full supply situation.” The shortage could get worse in the coming weeks as Sony expands the sales of the PS4 into many more international markets. The company’s PlayStation 4 Eye camera is also in demand and is currently in limited supply in the U.S., according to a report by Forbes.
T = Technicals on the Stock Chart Are Mixed
Sony stock has seen its fair share of struggles over the past few years. The stock is currently surging higher and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sony is trading between its rising key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Sony options may help determine if investors are bullish, neutral, or bearish.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| Sony options |
29.37% |
16% |
13% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
|
Put IV Skew |
Call IV Skew |
|
| April Options |
Average |
Average |
| May Options |
Average |
Average |
As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sony’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sony look like and more importantly, how did the markets like these numbers?
|
2013 Q4 |
2013 Q3 |
2013 Q2 |
2013 Q1 |
|
| Earnings Growth (Y-O-Y) |
115.39% |
22.71% |
82.50% |
125.35% |
| Revenue Growth (Y-O-Y) |
23.86% |
10.64% |
-8.96% |
-5.41% |
| Earnings Reaction |
3.89% |
-11.17% |
4.37% |
0.78% |
Sony has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Sony’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has Sony stock done relative to its peers, Microsoft (NASDAQ:MSFT), Canon (NYSE:CAJ), Dolby Laboratories (NYSE:DLB), and sector?
|
Sony |
Microsoft |
Canon |
Dolby Laboratories |
Sector |
|
| Year-to-Date Return |
5.67% |
5.80% |
-3.91% |
13.38% |
6.23% |
Sony has been an average performer, year-to-date.
Conclusion
Sony is a provider of innovative technology products to consumers and companies worldwide. The company announced last week that demand for the well-received PlayStation 4 will outstrip supply at least until the summer of this year. The stock has struggled in recent years, but is currently surging higher. Over the last four quarters, earnings and revenues have been on the rise, which has pleased investors. Relative to its peers and sector, Sony has been an average year-to-date performer. WAIT AND SEE what Sony does this coming quarter.
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